Chapter 11 Flashcards
(21 cards)
What is a production?
Production is the transformation of factors into goods
What is a firm?
A firm is an economic institution that transforms factors of production into goods and services
What 3 things do firms do?
Organize factors of production and/or
Produce goods and services and/or
Sell produced goods and services
What is the goal of a firm?
To maximize profits
What is total cost?
total cost is explicit payments to the factors of production plus the opportunity cost of the factors provided by the owners of the firm
What is total revenue?
total revenue is the amount a firm receives for selling its product or service plus any increase or decrease in the value of the assets owned by the firm
What are accountants?
focus on explicit costs and revenues
What are economists?
focus on both explicit and implicit costs and revenue
What can the production process be split into?
Short run and long run
What is a short run?
A firm is constrained in regard to what production decisions it can make
Some inputs are fixed
What is a long run?
A firm chooses from all possible production techniques
All inputs are variable
What is a production table?
A production table is a table showing the output resulting from various combinations of factors of production or inputs
What is the average product?
The output
What is the marginal output?
Marginal product is the additional output that will be forthcoming from an additional worker, other inputs constant
What are fixed costs?
Fixed costs (FC) are those that are spent and cannot be changed in the period of time under consideration
What are variable costs?
Workers are an example of variable costs (VC) which are costs that change as output changes
What are total costs?
The sum of the variable and fixed costs are total costs (TC)
What is the average fixed cost?
Average fixed costs (AFC) equals fixed cost divided by quantity produced, AFC = FC/Q
What is the average variable cost?
Average variable costs (AVC) equals variable cost divided by quantity produced, AVC = VC/Q
What is the average total cost?
Average total costs (ATC) equals total cost divided by quantity produced, ATC = TC/Q or ATC = AFC + AVC
What is the marginal cost?
Marginal cost (MC) is the increase in total cost when output increases by one unit, MC = ΔTC/ΔQ
