Ch 5 & 6 Supply Flashcards
Define– Diminishing returns to scale.
A situation when a proportionate increase in all inputs yields a less than proportionate increase in output.
Define– Fixed input.
An input to production that does not vary in the short run. The time for which at least one input cannot be changed actually defines the short run.
Define– Long run.
A decision-making time frame over which quantities of all inputs to production can be varied.
Define– Output.
The good or service that is the result of the production process (in the case of health services, the service that is delivered).
Define– Outcome.
A change in health status as a result of the system processes (in the health services context, the change in health status as a result of care).
Define– Production function.
The functional relationship that indicates how inputs are transformed into outputs in the most efficient way.
Define– Production possibilities frontier.
The boundary between the combinations of goods that can be produced and those that cannot with the resources available.
Define– Returns to a factor.
This measures the addition to output as one factor to production is increased.
Define– Returns to scale.
This measures the addition to output as the scale of operations increases in the long run so that all inputs can be varied.
Define– Short run.
A decision-making time frame within which at least one input (the fixed input – see above) cannot be varied.
Define – Technical (operational) efficiency.
A point at which a producer cannot produce more output without using more of at least one input.
Define – Variable input.
An input to production that varies directly with the level of output.
Define – supply
the willingness and ability to sell a good at each and every price over a given period of time.
Define – supply
It depends on what?
the willingness and ability to sell a good at each and every price over a given period of time.
Depends on many factors that influence the relationship between inputs and outputs (production) and cost of production.
What does it mean for a system to be technically inefficient?
It still has the ability to make more outputs without needing more inputs, thus increasing social welfare.
What does it mean for a system to be technically efficient?
It’s already being as efficient as it can be. In order to increase the output, need to increase the input. There also exists trade offs, where to make more of something, may mean taking away inputs to make something else.
How do we get more output without needing more input?
Improvement in technology that allows for improved efficiency.
A “production function” graph plots what?
Plots inputs vs outputs.
What is “returns to a factor” compared to “returns to scale”?
returns to a factor– how much additional output when increasing only one factor.
returns to scale– how much additional output when increasing all inputs/ factors by the same proportion
What is “returns to a factor” compared to “returns to scale”?
Can “return to scale” occur with long, short or both runs?
returns to a factor– how much additional output when increasing only one factor.
returns to scale– how much additional output when increasing all inputs/ factors by the same proportion. Just in long run because in short runs there are fixed inputs.
What is “returns to a factor” compared to “returns to scale”?
Can “return to scale” occur with long, short or both runs?
returns to a factor– how much additional output when increasing only one factor.
returns to scale– how much additional output when increasing all inputs/ factors by the same proportion. Just in long run because in short runs there are fixed inputs.
Define– Economic profit.
Total revenue minus total cost and distinct from normal profit.
Define– Economies of scale.
The conditions under which long-run average cost decreases
as output increases.
Define– Fixed cost.
A cost of production that does not vary with the level of output.
