Test 4-production function PT3 Flashcards
1
Q
rising marginal cost
A
marginal cost rises with the quantity of output produced
2
Q
average total cost
A
is U shaped
is the sum of AFC & AVC
3
Q
AFC
A
always declines as output rises
because the fixed costs is spread over a larger # of units produced
4
Q
AVC
A
typically rises as output increases
because of diminishing marginal product
5
Q
efficient scale
A
the quantity of output that minimizes ATC
(costs are at its lowest)
6
Q
the relationship between MC & ATC
If MC is lower than ATC…
A
the cost of adding one more unit of output is low
7
Q
the relationship between MC & ATC
If MC is higher than ATC…
A
The cost of adding one more unit of output is Higher
