question
short run
answer
time frame in which the quantity of at least one factor of production is fixed
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firm's plant
answer
fixed factors of production (capital, land, entrepreneurship)
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long run
answer
time frame in which the quantities of all factors of production can be varied
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sunk cost
answer
the past expenditure on a plant that has no resale value
question
total product
answer
the maximum output that a given quantity of labor can produce
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marginal product of labor
answer
the increase in total product that results from a one-unit increase in the quantity of labor employed, with all other inputs remaining the same
question
average product of labor
answer
tells us how productive workers are on average; equal to total product divided by the quantity of labor employed
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diminishing marginal returns
answer
occurs when the marginal product of an additional worker is less than the marginal product of the previous worker
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law of diminishing returns
answer
as a firm uses more of a variable factor of production with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes
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total cost
answer
the cost of all the factors of production the firm uses
question
total fixed cost
answer
the cost of the firm's fixed factors
question
total variable cost
answer
the cost of the firm's variable factors
question
marginal cost
answer
the increase in total cost that results from a one-unit increase in output
question
average fixed cost
answer
total fixed cost per unit of output
question
average variable cost
answer
total variable cost per unit of output
question
average total cost
answer
total cost per unit of output
question
long-run average cost curve
answer
the relationship between the lowest attainable average total cost and output when the firm can change both the plant it uses and the quantity of labor it employs
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economies of scale
answer
features of a firm's technology that make average total cost fall as output increases
question
diseconomies of scale
answer
features of a firm's technology that make average total cost rise as output increases
question
constant returns to scale
answer
features of a firm's technology that keeps average total cost constant as output increases
question
minimum efficient scale
answer
the smallest output at which long-run average cost reaches its lowest level
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