Chap 4 (Quiz 4) Flashcards
Average total cost
total cost divided by the quantity of output
Average variable cost
variable cost divided by the quantity of output
Average-marginal rule
Fixed cost
cost of the fixed inputs
Marginal cost
the additional cost of producing one more unit; mathematically, MC=ΔTC/ΔL
Revenue
income from selling a firm’s product; defined as price times quantity sold
Short-run average cost curve
the average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs
Total cost
the sum of fixed and variable costs of production
Variable cost
cost of production that increases with the quantity produced; the cost of the variable inputs
Constant returns to scale
expanding all inputs proportionately does not change the average cost of production
Diseconomies of scale
the long-run average cost of producing output increases as total output increases
Economies of scale
the long-run average cost of producing output decreases as total output increases
Long-run average cost curve
shows the lowest possible average cost of production, allowing all the inputs to production to vary so that the firm is choosing its production technology
