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Production Function
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a function that shows a firms maximum output quantity based on several inputs
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Marginal Rate of Technical Substitution
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the rate at which labor substitutes for capital without affecting output
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Increasing returns to scale
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if all inputs by a fixed percentage increase output by more than a percent
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labor-saving technological progress
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a change in the production function that makes the firm more productive and increases the marginal product of capital relative to the marginal product of labor
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Economic Cost
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The full opportunity cost of making a decision or producing output including both implicit and explicit costs.
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Cost minimizing problem
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the problem of finding the input combination that produces a given amount of output at the lowest possible cost
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Total cost function
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a production function that shows how the cost of production varies with the quantity of output
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Economies of scale
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average cost decreases as output increases
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Short Run
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a period of time in which the level of at least one of the firm's inputs are fixed
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Monopoly
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One seller in a market
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Monopsony
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One buyer in a market
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Barrier to entry
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a factor that lets firms enjoy monopolistic power while preventing rivals from profitability entering the market
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First degree price discrimination
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Pricing each unit of good sold to each consumer at exactly that consumer's willingness to pay
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Second degree price discrimination
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charging different customers different prices based on the quantities of the product they purchase
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Third degree price discrimination
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charging different prices to different consumer groups or segments in a market
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