SEMI FINALS Flashcards
is the creation of any good or service to sell to buyers. It is any activity that creates value. It is the creation of outputs by business firms, government agencies, and non-profit institutions. It is n activity where inputs are transformed into outputs.
Production
it includes raw materials, ingredients, supplies, tools, machinery, equipment, and physical facilities.
Capital
combines and processes the various materials.
labor
is where it is allotted for processing is located.
land
performs functions like supervision, planning, control, coordination, and leadership.
Entrepreneurial or managerial talent
is the relationship between the number of inputs required and the amount of output obtained. It is a schedule showing the maximum amount of outputs produced from any specified sets of inputs given the existing technology.
production function
who simplify that a production technology tells us the specific quantities of inputs needed to produce any given service or good. Several different techniques can produce the most outputs.
Case, Fair, and Oster (2017)
Five hundred men and women could descend on the building with sledgehammers and carry the pieces away by hand; this would be a
labor-intensive technology
Two people could produce the same park with a wrecking crane, a steam shovel, a backhoe, and a dump truck; this would be
capital- intensive technology
are composed of short-run, which refers to the time frame in which the input of one or more productive agents is fixed. This is any period not long enough to allow the full effects of some changes to have operated.
Time frame references
refers to the period in which all inputs are variable. This is because when fixed inputs need adjustment, it can be done when given sufficient time.
long run
refers to the total output produced in physical units.
total output/total product
refers to the total output divided by the variable inputs’ quantity under consideration
average product
refers to the additional output attributed to the increase in the variable inputs’ quantity under consideration.
marginal product
total product (TP) increases. Average product (AP) decreases, and marginal product (MP) diminishes. This process is called
increasing returns to scale
the marginal product is at zero. That is, the additional variable input yields no increase in output. This phenomenon is called
the constant returns to scale
the average product (AP) decreases as the total product (TP) is maximum. This is where a rational producer should stop adding more input, or
decreasing returns to scale
shows the productivity of the inputs at various levels. It indicates point A where the firm is most efficient. If efficiency is an objective average product curve is a useful tool of analysis.
average product curve
is the additional output produced by hiring one more unit of a specific input, holding all other inputs constant.
marginal product
It states that “as successive units of a variable resource (say, labor) are added to a fixed resource (say, capital of land) beyond some point, the extra or marginal product that can be attributed to each additional unit of the variable resource will decline.”
Law of Diminishing Returns
It states that “as successive units of a variable resource (say, labor) are added to a fixed resource (say, capital of land) beyond some point, the extra or marginal product that can be attributed to each additional unit of the variable resource will decline.”
Law of Diminishing Returns
first formulated diminishing returns based on his observations of agriculture in nineteenth-century England. He noted that within a given area of land, successive “doses” of labor and capital yielded smaller and smaller increases in crop output.
The British economist David Ricardo
is a line similar to the budget line. In production, this line represents all the possible combinations of two variable inputs of equal total costs.
Isocost
is like the indifference curve, which traces the different varieties of variable inputs that a firm can use to produce the given amounts of outputs.
Isoquant
refers to the total payment by a firm to the owner of the factors of production; they are the expenditure side of a firm in the process of creating goods and services.
cost of production
refers to the sum of all the expenditures in producing goods and services. This is derived by adding fixed cost to variable costs.
total cost
is the portion of total cost which remains unchanged even if the level of output changes (ex. rent).
Fixed cost
Total fixed cost is sometimes called
overhead
is the part of the total cost that vary with the amount of output produced. (wages, raw material).
variable cost
is the sum of those costs that vary with the level of output in the short run. To produce more output, a firm uses more inputs.
total variable cost
is the sum of the average fixed cost and average variable cost. This is also known as the total cost per unit. It is determined by dividing total cost by the volume of output.
average cost
is the sum of the average fixed cost and average variable cost. This is also known as the total cost per unit. It is determined by dividing total cost by the volume of output.
average cost
is the cost of producing one more unit of output. it is derived by ascertaining the change in total cost and dividing it by the change in the quantity of output. This is the most important of all cost concepts. It reflects changes in variable costs.
marginal cost
these are payments to the owners of production like wages, interests and others. This is also known as an expenditure cost. This is an out-of-pocket costs or costs as an accountant would define them and also known as accounting cost.
Explicit costs
is where the factors of production belong to the user, so they do not pay. This is known as non-expenditure cost.
Implicit cost
is a cost that has been incurred and can no longer be recovered. Examples are, Research and Development, marketing expense and equipment.
sunk cost
is a cost that must be given up to obtain some items. It is something that people must take into account.
opportunity cost
is less straightforward to define. We define total cost here to include out-of-pocket costs and opportunity cost of all inputs or factors of production.
total cost
are sometimes referred to as explicit costs or accounting costs. These refer to costs as an accountant would calculate them.
out-of-pocket cost
include the opportunity cost of every input. These opportunity costs are often referred to as implicit costs.
Economics cost
is that amount that could be earned on invested capital adjusted for the riskiness of that investment
The opportunity cost of capital
is a decision period during which the business has a fixed scale or a fixed factor of production and there is neither exit nor entry from the business.
short run
is defined as the decision period over which firms can choose to expand or contract all of their factors of production.
long run
is the additional income of a firm brought by producing and selling one additional unit of a product.
marginal revenue
