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technology
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the processes a firm uses to turn inputs into outputs of goods and services
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technological change
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a change in the ability of a firm to produce a given level of output with a given quantity of inputs
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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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long run
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the period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant
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total cost
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the cost of all the inputs a firm uses in production (TC)
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variable costs
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costs that change as output changes (VC)
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fixed costs
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costs that remain constant as output changes (FC)
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opportunity cost
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the highest-valued alternative that mist be given up to engage in an activity
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explicit cost
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a cost that involves spending money
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implicit cost
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a non-monetary opportunity cost
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production function
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the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs
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average total cost
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total cost divided by the quantity of output produced (ATC = TC/Q)
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marginal product of labour
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the additional output a firm produces as a result of hiring one more worker
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law of diminishing returns
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the principle that, at some point, adding more of variable input, such as labour, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
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average product of labour
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the total output produced by a firm divided by the quantity of workers
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marginal cost
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the change in a firm's total cost from producing one more unit of a good or a service (MC = TC/Q)
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average fixed cost
answer
fized cost divided by the quantity of output produced
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average variable cost
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variable cost divided by the quantity of output
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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 of scale
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the situation when a firm's long-run average costs fall as it increases the quantity of output it produces
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constant returns to scale
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the situation in which a firm's long-run cost remains unchanged as it increases output
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minimum efficient scale
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the level of output at which all economies of scale are exhausted
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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
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