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Average Variable
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the variable cost per unit of output.
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Average fixed cost
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is the fixed cost per unit of output.
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Total cost
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is the sum of the fixed cost and the variable cost of producing that quantity of output.
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Fixed cost
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a cost that does not depend on the quantity of output produced. It is the cost of the fixed input.
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Long-run
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is the time period in which all inputs can be varied.
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Marginal product
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input is the additional quantity of output produced by using one more unit of that input.
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Average total cost
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is total cost divided by quantity of output produced.
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Short-run
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is the time period in which at least one input is fixed.
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Production function
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is the relationship between the quantity of inputs a firm uses and the quantity of output it produces.
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Decreasing returns to scale
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scale when output increases less than in proportion to an increase in all inputs.
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Increasing returns to scale
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when output increases more than in proportion to an increase in all inputs. For example, with increasing returns to scale, doubling all inputs would cause output to more than double.
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Constant returns to scale
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when output increases directly in proportion to an increase in all inputs.
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Variable cost
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is a cost that depends on the quantity of output produced. It is the cost of the variable input.
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Diminishing returns to an input
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when an increase in the quantity of that input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input.
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