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AVERAGE FIXED COST
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THE FIXED COST DIVIDED BY THE UNITS OF OUTPUT PRODUCED
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average variable cost
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the variable cost divided by the units of output produced
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tax changes
answer
income tax will be reduced by ⅔
many other wartime taxes will either be reduced or removed
many other wartime taxes will either be reduced or removed
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Iso-Cost Curve
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A curve that represents all of input combinations that yield the same cost.
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Isoquant
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a curve that shows all the combinations of two inputs, such as capital and labor, that will produce the same level of output
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Returns to scale
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rate at which output increases as inputs are increased proportionately
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economies of scope definition
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situation in which it is less expensive to produce goods jointly than separately.
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Characteristics of perfect competition
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1. Many buyers and many sellers.
2. The goods offered for sale are largely the same.
3. Firms can freely enter or exit the market.
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Profit-maximizing output decision
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A manager maximizes profit when the value of the last unit of product (marginal revenue) equals the cost of producing the last unit of production (marginal cost). Maximum profit is the level of output where MC equals MR.
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shut down rule
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The firm shuts down only if it can reduce its loss by doing so
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market supply curve
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the supply curve that shows the quantities offered at various prices by all firms that offer the product for sale in a given market
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marginal product of labor
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the change in output from hiring one additional unit of labor
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average product of labor
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the total output produced by a firm divided by the quantity of workers
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diminishing marginal returns
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a level of production in which the marginal product of labor decreases as the number of workers increases
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Cobb-Douglas production function
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A production function that assumes some degree of substitutability among inputs.
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Marginal Rate of Technical Substitution
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The extra units of one input needed to replace one unit of another input that enables a firm to keep the amount of output it produces constant.
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elasticity of demand
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a measure of how consumers respond to price changes
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Non-constant input prices
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market supply curves may slope
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EXAM 2 GRAPH REVIEW
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