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Technology
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the process a firm uses to turn inputs into outputs of goods/services
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Short Run
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period of time during which at least one of a firm's input is fixed
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Long Run
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period of time during which all inputs are variable
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Fixed Costs
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costs that remain constant as output changes
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Variable Costs
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costs that change as output changes
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Total Costs
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costs of all the inputs a firm uses in production
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Explicit Costs
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a cost that involves spending money
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Implicit Costs
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a non-monetary opportunity cost (capital earned/value of someone's time)
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Marginal Product of Labor
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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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at some point, adding more of a variable input, such as labor, to the same amount of fixed input, such as capital, will cause the marginal product of the variable input to decline
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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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Marginal Costs
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the change in a firm's total cost from producing one more unit of a good or service
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Long Run Average Cost
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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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a situation where a firm's long-run average costs fall as it increases the quantity of output it produces
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Minimum Efficient Scale
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the lowest level of output at which all economies of scale are exhausted
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Constant Returns to Scale
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situation in which a firm's long run average cost remains unchanged as it increases output
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Diseconomies of Scale
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situation in which a firm's long run average costs rise as the firm increases output (firm too big are too hard to manage)
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