question
total cost
answer
cost of all inputs used by a firm, FC+VC
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fixed cost
answer
constant costs as output changes (lease payment, insurance)
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variable cost
answer
costs that change as output changes (electricity, raw materials, laborours)
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margianal cost
answer
increase in total cost resulting from producing another unit of output (delta TC/delta Q)
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average total cost
answer
total cost divided by the quantity of output produced tc/q
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average fixed cost
answer
fc/q
question
average variable cost
answer
vc/q
question
implicit cost
answer
nonmonetary opportunity cost (giving up salary to open business)
question
explicit cost
answer
cost that involves spending money
question
marginal product of labor
answer
increase in total output resulting from adding an additional unit of labor input (delta q/ delta l)
question
average product of labor
answer
tq/l
question
marginal revenue
answer
change in total revenue from selling one more good (delta tr/ delta q)
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technology
answer
turn inputs into outputs of goods and services
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positive technology change
answer
produce more using the same inputs or produce more outputs with fewer inputs
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negative technology change
answer
output may decline
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short run
answer
the time period in which at least one input is fixed and can't be adjusted (store, office, factory), only variable inputs can be adjusted (workers)
question
long run
answer
the time period in which all inputs can be varied (new tech, bigger factory)
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production function
answer
the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs
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law of diminishing returns
answer
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
question
average product of labor
answer
Q/L
question
marginal cost below average total cost
answer
average total cost is falling, same as average variable cost
question
marginal cost above average total cost
answer
average total cost rises, same as average variable cost
question
long-run average cost curve
answer
a curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed
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economies of scale
answer
the firm's long-run average costs falling as it increases the quantity of output it produces
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constant returns to scale
answer
the situation in which a firm's long-run average costs remain unchanged as it increases output
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minimum efficient scale
answer
the level of output at which all economies of scale are exhausted
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diseconomies of scale
answer
the situation in which a firm's long-run average costs rise as the firm increases output
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perfectly competitive market
answer
easy to enter and exit market, non differentiated products, price takers (unable to effect market price) --demand is marginal revenue which is average revenue
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price takers
answer
unable to effect market price
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profit
answer
TR-TC
question
average revenue
answer
TR/Q
question
shutdown point
answer
the minimum point on a firm's average variable cost curve; if the price falls below this point, the firm shuts down production in the short run
question
economic loss
answer
the situation in which a firm's total revenue is less than its total cost, including all implicit costs
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long-run competitive equilibrium
answer
the situation in which the entry and exit of firms has resulted in the typical firm breaking even
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long-run supply curve
answer
a curve that shows the relationship in the long run between market price and the quantity supplied
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productive efficiency
answer
a good or service is produced at the lowest possible cost
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allocative effieciency
answer
production represents consumer preferences, every good produced up to the last unit providing marginal benefit = marginal cost
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marginal benefit
answer
the additional benefit to a consumer from consuming one more unit of a good or service
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monopolistic market
answer
a market structure characterized by differentiated products, price makers- they determine the price
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price effect
answer
lower price for each unit sold
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output effect
answer
sells higher quantity
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monopolistic market p>MR,
answer
MR is below the demand curve, will max profits where P>MC
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monopolostic long run
answer
firms enter market, demand curve shifts left and becomes more elastic, demand curve tangenet to atc
question
monopolostic firm entry
answer
decrease profits, shift individual demand curves left making demand more elastic
question
monop
answer
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