Costs and Production

Question 1

production function

Answer 1

a technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs

Question 2

marginal physical product (mpp)

Answer 2

the measure of this added output as labor increases

Question 3

normal profit

Answer 3

the opportunity cost of capital

Question 4

economic costs

Answer 4

payments a firm must make or incomes it must provide to resource suppliers to attract those resources away from their best production opportunities

Question 5

implicit cost

Answer 5

has opportunity cost; the cost of resources for which no payment was made

Question 6

explicit cost

Answer 6

a bill; can be identified by the accountant with a paper trail denominated in dollars

Question 7

economic cost calculation

Answer 7

explicit cost+implicit cost

Question 8

economic profits

Answer 8

total revenue less total costs return to owners above normal profits total revenue-its opportunity cost of production

Question 9

accounting profits

Answer 9

total revenue-explicit costs used to determine taxable income

Question 10

fixed costs

Answer 10

those costs who don’t vary with changes in short-run output must be paid even if you do not make money

Question 11

variable costs

Answer 11

those costs which change with level of output, including payment for materials, fuel, power, transportation, and labor

Question 12

short run

Answer 12

a period of production during which some inputs cant be varied

Question 13

long run

Answer 13

a period of production long enough for all inputs to be varied

Question 14

marginal physical product

Answer 14

change in total product that results from a 1 unit increase in the quantity of labor employed, with all other units remaining the same

Question 15

marginal physical product calculation

Answer 15

change in total product/change in variable product

Question 16

diminishing marginal returns

Answer 16

when marginal physical product of an additional worker is less than the marginal physical product of the previous worker

Question 17

marginal cost (mc)

Answer 17

the increase in total cost associated with a one-unit increase in production

Question 18

average product calculation

Answer 18

total products/units of labor

Question 19

total cost calculation

Answer 19

sum of fixed+variable costs

Question 20

marginal cost calculation

Answer 20

change in total/change in output

Question 21

average fixed cost

Answer 21

total fixed cost per unit of output

Question 22

average fixed cost calculation

Answer 22

total fixed cost/Q

Question 23

average variable cost

Answer 23

total variable cost per unit of output

Question 24

average variable cost calculation

Answer 24

total variable cost/q

Question 25

average total cost

Answer 25

total cost per unit of output

Question 26

avg calculation

Answer 26

tc/q or afc+avc

Question 27

position of short run curves depend on

Answer 27

technology and price of productive resources

Question 28

the long-run average cost curve

Answer 28

is the relationship between the lowest attainable average total cost and output when both the plant size and labor are varied

Question 29

economies of scale

Answer 29

reductions in minimum average costs tht come through increases in the size (scale) of plants and equipment

Question 30

diseconomies of scale

Answer 30

if the plant size gets too big, however, long-run average costs begin to rise,

Question 31

production efficiency

Answer 31

goods produced in the least costly way