Chpt 8: Technology, Production, and Costs

Question 1

Technology

Answer 1

The processes a firm uses to turn inputs into outputs of goods and services

Question 2

Technological Change

Answer 2

A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs

Question 3

Short Run in Economics

Answer 3

The period of time during which at least one of a firm’s inputs is fixed

Question 4

Long Run in Economics

Answer 4

The period of time in which a firm can vary all its inputs, adopt new technology, and increase and decrease the size of its physical plant

Question 5

Total Cost

Answer 5

The cost of all the inputs a firm uses in production

Question 6

Variable Costs

Answer 6

Costs that change as output changes
(Raw materials, credit card fees costs that

Question 7

What is the equation for Total cost?

Answer 7

Total cost = Fixed Cost + Variable cost (TC = FC + VC)

Question 8

Fixed Costs

Answer 8

Costs that remain constant as output changes
(Rent, salaries, utility bills, insurance. things you have to pay for regardless of how much you sell)

Question 9

Opportunity Cost

Answer 9

The highest-valued alternative that must be given up to engage in an activity

Question 10

Explicit Cost

Answer 10

A cost that involves spending money

Question 11

Implicit Cost

Answer 11

A non monetary opportunity cost (not recorded for accounting purpose)

Question 12

Production Function

Answer 12

The relationship between the inputs employed by a firm and the maximum output by a firm and the maximum output the firm can produce with those inputs

Question 13

Average total cost

Answer 13

Total cost divided by the quantity of output produced

Question 14

Marginal product of labor

Answer 14

The additional output a firm produces as a result of hiring one more worker (first person brings in 200 quantity of products produced second brings in 250 and third lowers it by bringing in 100)

Question 15

Law of diminishing returns

Answer 15

The principle that, at some point, adding more of a variable input, such as capital, will cause the marginal product of the variable input to decline

Question 16

Division of Labor

Answer 16

The Work is divided up to improve efficiency at a certain point the improvement of production starts to plateau

Question 17

Diminishing returns

Answer 17

When the division of labor starts to plateau

Question 18

Average product of Labor

Answer 18

The total output produced by a firm divided by the quantity of workers (Divide the quantity produced by the number of workers)

Question 19

Marginal Cost

Answer 19

The Change in a firm’s total cost from producing one more unit of a good or service (Can be calculated by dividing the change in total cost by the change in output MC= Change in Total Cost/Change in Quantity(output) )

Question 20

Average Fixed Cost

Answer 20

Fixed cost divided by the quantity of output produced (Fixed cost/Quantity)

Question 21

Average Variable Cost

Answer 21

Variable cost divided by the quantity of output Produced

Question 22

Long-run average cost curve

Answer 22

A curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed

Question 23

Economies of scale

Answer 23

The situation in which a firm’s long-run average cost falls as it increases the quantity of output it produces

Question 24

Constant Returns to scale

Answer 24

The situation in which a firm’s long-run average costs remain unchanged as it increases output

Question 25

Minimum Efficient Scale

Answer 25

The level of output at which all economies of scale are exhausted

Question 26

Diseconomies of Scale

Answer 26

The situation in which a firm’s long-run average cost rises as the firm increases output