Ch 8 - Production and Cost Flashcards
Firms are….
Organizations that produce goods and services
The short run in the microeconomics context is….
A planning period over which the managers of a firm must consider one or more of their factors of production as fixed in quantity
When the quantity of a factor of production cannot be changed during a particular period, it is called ….
A fixed factor of production
When the quantity of a factor of production can be changed during a particular period, it is called ….
A variable factor of production.
The planning period over which a firm can consider all factors of production as variable is called…
The long run
The relationship between factors of production and the output of a firm is called…
A production function
A total product curve shows…
The quantities of output that can be obtained from different amounts of a variable factor of production, assuming other factors of production are fixed.
The amount by which output rises with an additional unit of a variable factor is the…… Of the variable factor.
Marginal product
The marginal product of labor is…
The amount by which output rises with an additional unit of labor.
The average product of labor is…
The ratio of output to the number of units of labor (Q/L).
AP(sub L) = Q/L
The range over which marginal products are increasing is called the range of….
Increasing marginal returns
When an additional unit of a variable factor adds less to total output, the firm is experiencing…
Diminishing marginal returns
When additional units of a variable factor reduce total output, given constant quantities of all other factors, the company experiences….
Negative marginal returns
The law of diminishing marginal returns holds that…
The marginal product if any variable factor of production will eventually decline, assuming the quantities of other factors if production are unchanged.
Marginal product _______ over the range of _______ and _______ over the range of _______ .
rises; increasing marginal returns; falls; diminishing marginal returns
