behind the supply curve Flashcards
what is a production function
it is the relationship between the quantity of inputs the firm uses and the quantity of outputs it produces
what run is all inputs varied
long run
what run is at least one input fixed
short run
how can a firm increase output in the short run
increase the amount of workers
what is total product
total output in a given period
what is marginal product of labor
its the change in total product from a one unit increase or decrees in quantity of labor employed
what is average product of labor
total product dived by quantity of labor employed so it finds out how much product each worker produces
average product of labor equation
apl = total quantity of output / total quantity of labor employed
marginal and average product relationship
when marginal product is greater than average then the average product is increasing when marginal product is less then the average product then the average product is decreasing
what is a fixed cost
its a cost that doesn’t depend on the quantity of output produced. its the cost of the fixed input
what is variable cost
its the cost that depends on the quantity of output produced
what is total cost
its the fixed cost plus the variable cost
what happens to the total cost curve when more output is produced
the curve gets steeper
what happens to TVC when you increase your output
tvc will sharply rise due to diminishing returns
what is marginal cost
its the change in total cost generated by one additional unit
marginal cost formula
MC= change in total cost / change in quantity
what is diminishing marginal returns
when the marginal cost raises and the output increases
average fixed cost
its the total fixed cost per unit
afc= total fixed cost / quantity
average variable cost
total variable cost per unit of output
avc = total variable cost / quantity
average total cost
total cost per unit of output
atc = total cost / quantity
also atc = average fixed and variable costs added together
what is the minimum cost output
quantity of output where the total cost is the lowest
this is where firms want to be
at the minimum cost output atc= mc
marginal greater than average
average increases
marginal less than average
average decreases
marginal equal to average
average is at its minimum this is where the two lines intersect
tech effect on cost curve
tech shifts the curve down cuz it makes the stuff cheaper to produce. tech will also increase the fixed cost but lower the variable cost
what changes does a change in fixed cost cause
shifts the total and average total cost curves up but the marginal cost curve stays the same
what are the factors of production
land labor and capital and entrepreneurs
what is the relationship with fixed and variable cost
if fixed cost is low then variable cost will be high vice versa
when should you have lower fixed cost
at low output levels
when should you have a higher fixed cost
at high output levels
what is the long run average cost curve
it shows the cost of producing each quantity and allowing for firms to choose its level of fixed costs
