Quiz 6 Flashcards
A Cost that depends on the quantity of output produced; the cost of the variable input
variable cost
The sum of the fixed cost and the variable cost of producing a quantity of output
total cost
A graphical representation of the total cost, showing how total cost depends on the quantity of output
total cost curve
Total cost divided by quantity of output produced
average total cost
total cost divided by the number of goods produced
Average Total Cost
Total cost divided by the number of goods produced
average cost
A distinctive graphical representation of the relationship between output and total average cost; The average total cost curve at first falls when output is low and then rises as output increases
U-shaped average total cost curve
The fixed cost per unit of output
average fixed cost
The variable cost per unit of output
average variable cost
The quantity of output at which average total cost is lowest- the bottom of the U-shaped average total cost curve
Minimum-cost output
A graphical representation showing showing the relationship between output and average total cost when a fixed cost has been chosen to minimize average total cost for each level of output
Long-run average total cost curve
long-run average total cost declines as output increases
economies of scale
OR
increasing returns to scale
long-run average total cost increases as output increases
diseconomies of scale decreasing
OR
decreasing returns to scale
long-run average total cost remains the same as output increases
constant returns to scale
A cost that has already been incurred and is nonrecoverable
sunk cost
hire factors so that the marginal product per dollar spent on each factor is the same; a firm uses this rule to determine cost-minimizing combination of inputs
cost-minimization rule
A firm whose actions have no effect on the market price on the good or service it sells
price-taking firm
A consumer whose actions have no effect on the market price of the good or service he or she buys
price-taking consumer
A market in which all market participants are price-takers
perfectly competitive market
An industry in which all producers are price-takers
perfectly competitive industry
The fraction of the total industry output accounted for by a firm’s output
market share
Output of different producers regarded by consumers as the same good; also referred to as a commodity
standardized product
