Costs Flashcards
define fixed costs
doesnt change with output
define semi variable costs
costs which exhibit elements of both
define fixed costs
limited to premises and machinery
define law of diminishing returns
as more units of a variable input are added to fixed amounts of land and capital the change total output will first rise and then fall
when does diminishing returns to labour occur
when marginal product of labour starts to fall total output increases at a decreasing rate
how will firms produce in the short run
provided revenue is greater than/equal to variable costs
how will firms product in the long run
will only produce if revenue is greater than equal to total costs
define short run
the time period in which at least one factor of production is fixed and cannot be varied
define long run
time period in which no factor of productions are fixed and all factors of production can be varied
define total returns of labour
total output produced by all the workers employed by a firm
define average returns of labour
total output divided by the total number of workers employed
define marginal returns of labour
change in quantity of total output resulting from the employment of 1 or more workers holding all the other factors of production fixed
assumptions of law of diminishing returns
each unit of variable factors is the same
