Chapter 7 - Technology Production and Costs Flashcards
Technology
The processes a firm uses to turn inputs into outputs of goods and services.
Technological change
A change in the ability of a firm to produce output with a given quantity of inputs.
Short Run
The period of time during which at least one of the firms inputs is fixed.
Long Run
A period of time long enough to allow a firm to vary all of its inputs, to adopt new technology and increase or decrease the size of its physical plant.
Total Cost
The cost of all the inputs a firm uses in production.
Variable costs
Costs which change as the quantity of output changes I.e. labour
Fixed costs
Costs which remain constant as the quantity of output changes
Total cost formula
Total cost = fixed costs + variable costs TC = FC+VC
Opportunity cost
The highest valued alternative that must be given up to engage in an activity.
Explicit cost
A cost that involves spending money
Implicit cost
A non monetary opportunity cost
Production function
The relationship between the inputs employed by the firm and the maximum output it can produce with those inputs.
Average total cost
Total cost divided by the quantity of input produced
Marginal product of labour
The additional output a firm produces as a result of hiring one more worker.
Law of diminishing returns
The principle that, at some point, adding more of a variable input, such as labour, to the same amount of fixed input, such as capital, will cause the marginal product of the variable to decline.
Diseconomies of scale
Cost Curve to remember
