week 3 Flashcards

1
Q

firm

A

uses some technology to convert inputs into some output that is sold on the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

rational behaviour of firms assumption

A

to make as much money as possible

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

production factors

A

he inputs used by a firm. e.g. capital goods, labor, and raw materials

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

production set

A

the set of all feasible way to produce

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

production function

A

y = f(x)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

isoquants

A

set of all possible combinations of inputs 1 and 2 that are just sufficient to produce a given amount of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

difference ic and isoquant

A

different isoquants identify different level of output and not different level of utility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

monotonicity (property of technology)

A

if you increase the amount of at least one of the inputs, it should be possible to produce at least as much output as you were producing originally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

convexity (property of technology)

A

if there are 2 ways to produce y units of output, (x1, x2) and (z1, z2), then their weighted average produces at least y units of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

marginal product

A

MP1 = ∆y / ∆x1
how much more output we would be able to produce when we add an additional unit of factor 1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

monotonic property

A

if added 1 unit of factor 1, holding factor 2 constant the total output will increase

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

law of diminishing marginal product

A

the marginal product of a factor
will diminish as we get more and more of that factor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

technical rate of substitution (TRS)

A

how much of factor 2 we need to add if we would like to give up a little bit of factor 1 to produce the same amount of output y

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

TRS function

A

TRS(x1, x2) = ∆x2/∆x1 = − MP1(x1,x2) / MP2(x1,x2)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

diminishing TRS

A

as we increase the amount of factor 1, and adjust
factor 2 so as to stay on the same isoquant, the TRS declines

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

profit

A

simply defined as revenues minus costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

n

A

number of total outputs produced by the firm

18
Q

yi

A

quantity of output i produced

19
Q

pi

A

price of output i

20
Q

m

A

number of total factors used for production

21
Q

xi

A

quantity of factor i used

22
Q

wi

A

proce of input i

23
Q

economic definition of profit

A

value all inputs and outputs at their opportunity cost

24
Q

fixed factor

A

a factor of production that is purchased in fixed amount in a unit of time

25
variable factor
factor of production that can be used in different amounts
26
isoprofit lines
all combinations of the input goods and the output good that give a constant level of profit
27
slope of the production function
the marginal product, and the slope of the isoprofit line is w1/p, hence MP1 = w1/p
28
cost minimization problem
min w1x1 + w2x2 x1,x2 Such that: f (x1, x2) = y
29
cost function
c(w1, w2, y) ⇒ Measures the minimal costs of producing y units of output when factor prices are (w1, w2)
30
isocost
all combinations of factors that cost the same amount
31
fixed costs
costs associated with fixed factors; need to be paid regardless of the amount of output produced
32
variable costs
costs associated with variable factors; Costs that change with the level of output
33
cost curve
visual descriptions of the various costs of production
34
cost function
the minimum cost of achieving a given level of output
35
total costs
the sum of the variable costs, cv (y), and the fixed costs, F : c(y) = cv (y) + F
36
average cost function (AC)
measures the cost per unit of output
37
average fixed cost function (AFC)
measures the fixed costs per unit output
38
average variable cost function (AVC)
measures the variable costs per unit of output
39
marginal cost curve
measures the change in costs for a given change in output
40
pure competition
A market is purely competitive if each firm assumes the market price is independent of its own level of output
41
maximization problem
max py − c(y) y