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short run
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the period of time during which at least one of a firm's inputs is fixed
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plant size
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the physical size or number of the factories (capital) that a firm owns and operates to produce its output. it can be based on how much it produces how big it is or etc...
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long run
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the time period in which all inputs can be varied
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production
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any creation of products from resources
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production function
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the relationship between quantity of inputs used to make a good and the quantity of output of that good
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average product
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total product/variable imput
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marginal product
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the increase in output that arises from an additional unit of input
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law of diminishing marginal product
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The observation that after some point, successive equal-sized increases in a variable factor of production, such as labor, added to fixed factors of production will result in smaller increases in output.
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total cost
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the sum of fixed and variable costs
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fixed costs
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Costs that do not vary with the quantity of output produced
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variable costs
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costs that vary with the quantity of output produced
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short run average cost curves
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Average total costs (ATC) = (TC)/(Q)Average Variable Cost (AVC)= (TVC)/(Q)Average fixed cost (AFC)= (TFC)/(Q)
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average fixed cost
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fixed cost divided by the quantity of output
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average variable cost
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variable cost divided by the quantity of output
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average total cost
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total cost divided by the quantity of output
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marginal cost
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the cost of producing one more unit of a good
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planning horizon
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the long run, which all inputs are variable.
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long run average cost curve
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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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planning curve
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long run average cost curve
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economies of scale
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decreases in long-run average costs resulting from increases in output.
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constant returns to scale
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No change in long-run average costs when output increases.
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diseconomies of scale
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increases in long-run average costs that occur as output increases.
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Minimum Efficient Scale (MES)
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the lowest level of output at which a firm can minimize long-run average total cost
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