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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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economies or scale
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factors that cause a producer's average cost per unit to fall as output rises
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minimum efficient scale
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The lowest rate of output at which a firm takes full advantage of economies of scale
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constant returns to scale
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when long-run average total cost is constant as output increases
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diseconomies of scale
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the situation in which a firm's long-run average costs rise as the firm increases output
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marginal cost (formula)
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the increase in total cost that arises from an extra unit of production (change in total cost / change in quantity)
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average total cost
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total cost divided by the quantity of output
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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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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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Marginal Rate of Technical Substitution (MRTS)
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the rate at which a firm is able to substitute one input for another while keeping the level of output constant
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isocost line
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all the combinations of two inputs, such as capital and labor, that have the same total cost
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