Chapter 11 Flashcards
Short run
at least one of the firms inputs is fixed
Long run
Firms can vary it’s inputs and adopt new technology
Total cost
The cost of all the inputs a firm uses in production
Variable cost
Cost changes as output changes
Fixed costs
Costs remains the same as output changes
Explicit costs
When a firm spends money
Implicit costs aka accounting cost
When a firm experiences a nonmonetary opportunity cost
Production function
The relationship between the inputs employed by a firm and the maximum output the firm can produce with those inputs
Marginal product of labor
More output the firm produces when they hire more workers
Law of diminishing returns
Adding more of a variable input to the same amount of fixed input will cause the marginal product of the variable input to decline - applies in the short run
Long-run average cost curve
A curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed
Economies of scale
When a firms long run average cost falls as it increases the quantity of output is produces
Minimum efficient scale
The level of output at which all economies of scale are exhausted
Diseconomies of scale
When a firm’s long run average total cost rises as the firm increases output
