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Marginal Product
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the additional output that can be produced by adding one more unit of a specific input.
change in total product / change in inputs.
change in total product / change in inputs.
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Average Product
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the output that is created per unit of input.
total product / units of labor
total product / units of labor
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Total Product
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total output or quantity produced
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Diminishing Marginal Returns
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as variable resources (ex: workers) are added to fixed resources (machinery, tools, etc.) the additional output produced for each new worker will eventually fall. firms reach a point at which additions to input lead to progressively smaller increases in output. does not apply in the long run, as there are no fixed resources
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Fixed Costs
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costs for fixed resources that DON'T change with the amount produced. (ex: rent, insurance, yearly salaries, taxes, etc.)
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Variable Costs
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costs that vary with the quantity of output produced, or can be changed quickly and relatively easily
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Total Cost
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the sum of fixed and variable costs
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Marginal Cost
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the cost to produce one additional unit of a single good.
change in total cost / change in the quantity of output
change in total cost / change in the quantity of output
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Total Variable Cost
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the sum of a business' variable costs. changes as total output changes
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Scale of Production
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the overall level of use of all factors of production. the quantity of output
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Long-Run ATC
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the cost-per-unit of the product being created. varies in three ways: economies of scale, constant returns to scale, and diseconomies of scale
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Economies of Scale
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occurs when the long-run average total cost decreases as the quantity of output increases
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Diseconomies of Scale
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occurs when the quantity of output increases and the long-run average total cost also increases
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Constant Returns to Scale
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occur when an increase in inputs leads to the same proportional increase in output
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Minimum Efficient Scale
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the quantity at which a firm's long-run average total cost curve is at its lowest value. at this point, the company achieves its greatest efficiency in production
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