Chapter 7: Production and Cost Flashcards
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| 514822519 | technology | the methods a firm can use to turn inputs into outputs | |
| 514822520 | long run | a period of time long enough for a firm to change the quantity of all of its inputs (all inputs are viewed as variable inputs) | |
| 514822521 | variable inputs | inputs that can be adjusted up or down as desired | |
| 514822522 | fixed inputs | inputs that, over the time period we're considering, cannot be adjusted, even if the firm's level of output changes (they remain constant) | |
| 514822523 | short run | a time period during which at least one of the firm's inputs is fixed | |
| 514822524 | total product | the maximum quantity of output that can be produced from a given combination of inputs | |
| 514822525 | marginal product of labor | how much output increases with each one-unit rise in employment; the change in total product divided by the number of workers employed | |
| 514822526 | increasing marginal returns to labor | the marginal product of labor increases as more labor is hired | |
| 514822527 | diminishing marginal returns to labor | the marginal product of labor decreases as more labor is hired | |
| 514822528 | diminishing marginal returns | In all kinds of production, if we keep increasing the quantity of any one input, while holding the others fixed, _________ will eventually set in | |
| 514822529 | law of diminishing (marginal) returns | as we continue to add more of any one input (holding the other inputs constant), its marginal product will eventually decline | |
| 514822530 | total cost; opportunity cost | A firm's ____ of producing a given level of output is the _______ of the owners - everything they must give up in order to produce that amount of output | |
| 514822531 | sunk cost | a cost that already has been paid, or must be paid, regardless of any future action being considered | |
| 514822532 | sunk costs | ______ should not be considered when making decisions | |
| 514822533 | opportunity cost; implicit | a firms cost is its _______, which includes both explicit and _____ costs | |
| 514822534 | least cost rule | a business firm will produce any given output level using the least-cost combination of inputs available for that output level | |
| 514822535 | fixed costs | costs of fixed inputs, which remain constant as output changes (i.e rent and interest) | |
| 514822536 | variable costs | costs of variable inputs, which change with output (i.e wages and materials) | |
| 514822537 | total fixed cost | the cost of all inputs that are fixed in the short run | |
| 514822538 | total variable cost | the cost of all variable inputs used in producing a particular level of output | |
| 514822539 | total cost | the sum of all fixed and variable costs TC= TFC + TVC | |
| 514822540 | increase | TC and TVC slop upward since these ______ along with output | |
| 514822541 | decrease | TC and TVC slope downward since these ______ along with output | |
| 514822542 | horizontal; vertical; TVC; TC | The TFC curve is either a _______ line or is the ______ distance between the rising ____ and ______ curves | |
| 514822543 | average fixed cost | the total fixed cost divided by the quantity (TFC/Q) | |
| 514822544 | fall | AFC will always _____ as output rises | |
| 514822545 | average variable cost | the cost of the variable inputs per unit of output (TVC/Q) | |
| 514822546 | average total cost | the total cost per unit of output (TC/Q) | |
| 514822547 | marginal cost | the change in total cost divided by the change in output; tells us how much cost rises per unit increase in output | |
| 514822548 | falls | when the marginal product of labor rises, marginal cost _______ | |
| 514822549 | rises | when the marginal product of labor falls, marginal cost _______ | |
| 514822550 | U | the marginal cost curve is ____ shaped | |
| 514822551 | lowest | the marginal cost curve intersects the AVC or ATC curve at their ______ points | |
| 514822552 | lower | if the marginal cost is lower than the average cost, producing the next unit will _____ the average cost | |
| 514822553 | raise | if the cost for one more unit (marginal cost) exceeds the previous average cost, producing that unit will _____ the average cost | |
| 514822554 | downward | at low levels of output, AVC and AFC are both falling, so the ATC curve slopes _______ | |
| 514822555 | upward | at higher levels of output, rising AVC overcome falling AFC, and the ATC curve slopes | |
| 514822556 | minimum | the MC curve crosses both the AVC curve and the ATC curve at their respective ________ points | |
| 514822557 | variable | in the long run, all inputs and all costs are ________ | |
| 514822558 | long-run total cost | the cost of producing each quantity of output when all inputs are variable and the least-cost input mix is chosen | |
| 514822559 | long-run average total cost | the cost per unit of producing each quantity of output in the long run, when all inputs are variable (LRATC = LRTC / Q) | |
| 514822560 | less; greater | the long-run total cost of producing a given level of output can be ______ than or equal to, but not ______ than, the short-run total cost | |
| 514822561 | less; greater | the long-run average cost of producing a given level of output can be ______ than or equal to, but no _____ than, the short-run average total cost | |
| 514822562 | plant | the collection of fixed inputs at a firm's disposal | |
| 514822563 | can; can not | in the long run, the firm (can/can not) change the size of its plant; in the short run the firm (can/can not) change the size of its plant | |
| 514822564 | LRATC | a firm's _____ curve combines portions of each ATC curve available to the firm in the long run | |
| 514822565 | lowest | for each output level, the firm will always choose to operate on the ATC curve with the _______ possible cost | |
| 514822566 | along | in the short run, a firm can only move ______ its current ATC curve | |
| 514822567 | from; varying the size of its plant | in the long run, a firm can move ________ the current ATC curve to another by ______________ | |
| 514822568 | LRATC | as a firm moves from one ATC curve to another, it will also be moving along its _______ curve | |
| 514822569 | economies of scale | long-run average total cost decreases as output increases | |
| 514822570 | economies of scale | when an increase in output causes LRATC to decrease, we say the the firm is enjoying ______ | |
| 514822571 | economies of scale; downward | when long-run total cost rises proportionately less than output, production is characterized by _______ and the LRATC curve slopes ________ | |
| 514822572 | lower | economies of scale are more likely to occur at ______ levels of output | |
| 514822573 | lumpy inputs | an inputs whose quantity cannot be increased gradually as output increases, but must instead be adjusted in large jumps | |
| 514822574 | diseconomies of scale | when LRATC rises with an increase in output, we have _________ | |
| 514822575 | diseconomies of scale | long-run average total cost increases as output increases | |
| 514822576 | diseconomies of scale; upward | when long-run total cost rises more than in proportion to output, there are __________, and the LRATC curve slopes ________ | |
| 514822577 | higher | diseconomies of scale are more likely to occur at _______ output levels | |
| 514822578 | constant returns to scale; fat | when both output and long-run total cost rise by the same proportion, production is characterized by _________, and the LRATC curve is _____ | |
| 514822579 | intermediate | constant returns to scale, if present at all, are most likely to occur at some ________ range of output | |
| 514822580 | minimum efficient scale | the lowest output level at which the firm's LRATC curve hits the bottom | |
| 514822581 | large; economies of scale | the minimum efficient scale tells us how ______ a firm grow in order to fully exploit ___________ |