chapter 15 Flashcards
the resources that go into production
inputs
the goods and services that result from production
outputs
production costs that can be adjusted relatively quickly and that do not need to be incurred if no production occurs
variable costs
production costs that cannot be adjusted quickly and that must be paid even if no production occurs
fixed costs (suck costs)
actual monetary costs paid by a producer as well as estimated reduction in the value of the producer’s capital stock
accounting costs
the total cost of production, including both accounting and opportunity costs
economic cost
an equation or graph that represents a relationship between types and quantities of inputs and the quantity of output
production function
a production input that is fixed in quantity, regardless of the level of production
fixed input
a production input whose quantity can be changed relatively quickly, resulting in changes in the level of production
variable input
(in terms of production processes) a period in which at least one production input has a fixed quantity
short run
a fixed input that creates a constraint to increasing production
limiting factor
(in terms of production processes) a period in which all production inputs can be varied in quantity
long run
a curve showing the total amount of output produced with different levels of one variable input, holding all other inputs constant
total product curve
the additional quantity of output produced by increasing the level of a variable input by one, holding all other inputs constant
marginal product
a situation in which each successive unit of a variable input produces a smaller marginal product
diminishing marginal returns
a situation in which each successive unit of a variable input produces an increasing marginal product
constant marginal returns
a situation in which each successive unit of a variable input produces a larger marginal product
increasing marginal returns
the sum of fixed and variable costs
total costs
a graph showing the relationship between the total cost of production and the level of output
total cost curve
the situation in which the cost of producing one additional unit of output rises as more output is produced
increasing marginal costs
the situation in which the cost of producing one additional unit of output stays the same as more output is produced
constant marginal costs
the situation in which the cost of producing one additional unit of output falls as more output is produced.
decreasing marginal costs
cost per unit of output, computed as total cost divided by the quantity of output produced
average cost (or average total cost)
the cost of production per unit of output when all inputs can be varied in quantity
long-run average cost
situations in which the long-run average cost of production falls as the size of the enterprise increases
economies of scale
situations in which the long-run average cost of production stays the same as the size of the enterprise increases
constant returns to scale
situations in which the long-run average cost of production rises as the size of the enterprise increases
diseconomies of scale
the smallest size an enterprise can be and still benefit from low long-run average costs
minimum efficient scale
the largest size an enterprise can be and still benefit from low long-run average costs
maximum efficient scale
increasing the use of some inputs, and decreasing that of others, while producing the same good or service
input substitution
