AP Microeconomics Chapter 8 Flashcards

12190476339	Production Function	The relationship between the quantity of inputs a firm uses and the quantity of outputs it produces	0
12190476340	Fixed Input	An input whose quantity is fixed and cannot be varied Connection: An example of a fixed input on a farm is land.	1
12190476341	Variable Input	An input whose quantity the firm can vary Connection: The ink at a printing press.	2
12190476342	Long Run	The time period in which all inputs can be varied Connection: Everything can change in the long run.	3
12190476343	Short Run	The time period in which at least one input is fixed Connection: There is not enough time to change some inputs during the short run.	4
12190476344	Total Product Curve	Shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input Connection: The total product curve is upward sloping but begins to flatten out as output increases, indicating diminishing returns to an input.	5
12190476345	Marginal Product	The additional quantity of output that is produced by using one more unit of that input Connection: One more worker yields 6 more shirts, which is the marginal product.	6
12190476346	Diminishing Returns to an Input	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 Connection: If you have too many workers, you may experience diminishing returns.	7
12190476347	Fixed Cost	A cost that does not depend on the quantity of output produced; it is the cost of the fixed input Connection: The cost of the land on a farm, being a fixed input, would be the fixed cost. So, if the land is $400, the fixed cost is $400.	8
12190476348	Variable Cost	A cost that depends on the quantity of output produced; the cost of the variable input Connection: Labor is a variable cost because you can hire/fire workers.	9
12190476349	Total Cost	Total cost of producing a given quantity of output is the sum of the fixed cost and the variable cost of producing that quantity of output Connection: If land on a farm is $800 and labor is $200 per worker with three workers, the total cost would be $1400.	10
12190476350	Total Cost Curve	Shows how total cost depends on the quantity of output	11
12190476351	Marginal Cost	The cost of each additional unit Connection: Pens have a low marginal cost since the inputs are cheap.	12
12190476352	Average Total Cost	Often referred to as simply average cost, total cost divided by the quantity of output produced	13
12190476353	Average Cost	Synonym of Average Total Cost	14
12190476354	U-Shaped Average Total Cost Curve	Falls at low levels of output then rises at higher levels Connection: Long run average total cost declines as output increases (economies of scale) and then begins to increase (diseconomies of scale).	15
12190476355	Average Fixed Cost	The fixed cost per unit of output Connection: falls as more output is produced as the numerator is fixed but the denominator increases.	16
12190476356	Average Variable Cost	The variable cost per unit of output	17
12190476357	Minimum-Cost Output	The quantity of output at which average total cost is lowest - the bottom of the U-Shaped Average Total Cost Curve Connection: At this point, ATC= MC	18
12190476358	Long Run Average Total Cost Curve	Shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output Connection: U-Shaped curve.	19
12190476359	Economies of Scale	When long run average total cost declines as output increases Connection: Ryan's hats experiences economies of scale from boot output 0-8 - the output levels over which the long run average total cost curve is declining.	20
12190476360	Diseconomies of Scale	When long run average total cost increases as output increases Connection: Ryan's hats Boots experiences diseconomies of scale from boot output of 8 or more, the output levels over which its long run average total cost curve is rising.	21
12190476361	Constant Returns to Scale	When long run average total cost is constant as output increases Connection: The firm's long run average total cost curve is horizontal over the output levels for which there are constant returns to scale.	22