Production Flashcards
The costs associated with the use of resources; the sum of explicit and implicit costs.
economic costs
Monetary payments made by individuals, firms, and governments for the use of land, labor, capital, and entrepreneurial ability
explicit costs
The opportunity costs of using owned resources
implicit cost
Total revenue minus explicit cost of production
accounting profit
Total revenue minus economic costs, which include both explicit and implicit costs of production
economic profit
The time period in which at least one input of production is fixed but other inputs can be changed.
short run
The total amount of output produced with a given amount of resources
total product
The additional output produced as a result of utilizing one more unit of variable resource
marginal product = Change in total product/change in variable resource
The average amount of output produced per unit of a resource employed
Average product = total product divided by the number of units of a resource employed
A characteristic of production whereby the marginal product of the next unit of variable resource utilized is greater than that of the previous variable resource
increasing marginal returns
A characteristic of production whereby the marginal product of the next unit of variable resource utilized is less than that of the previous variable resource
diminishing marginal returns
Costs that do not change with the amount of output produced
fixed cost
Costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases
variable cost
The sum of fixed and variable costs
Total cost
The variable cost curve, at each output level, falls:
Below the total cost curve by the amount of the fixed cost curve
Total fixed cost/the amount of output
average fixed cost = fixed cost per unit
Total variable cost divided by the amount of output produced
average variable cost = variable cost per unit
Total cost divided by the amount of output produced
average total cost = total cost per unit
A curve showing the average total cost for different levels of output when at least one input of production is fixed.
Short run average total cost
The time period in which all inputs of production can be changed
long run
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are variable
long-run average total cost curve
A condition in which the long-run average total cost of production decreases as production increases
economies of scale
A condition in which the long-run average total cost of production increases as production increases
diseconomies of scale
A condition in which the long-run average total cost of production remains constant as production increases
constant returns to scale
The lowest level of output at which the long-run average total cost is minimized
minimum efficiency scale
When examining the cost curves for a firm, the minimum average variable cost occurs at the output level where,
marginal cost equals average variable cost
