Chapter 7 - Technology Production and Costs Flashcards Preview

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Flashcards in Chapter 7 - Technology Production and Costs Deck (21):
1

Technology

The processes a firm uses to turn inputs into outputs of goods and services.

2

Technological change

A change in the ability of a firm to produce output with a given quantity of inputs.

3

Short Run

The period of time during which at least one of the firms inputs is fixed.

4

Long Run

A period of time long enough to allow a firm to vary all of its inputs, to adopt new technology and increase or decrease the size of its physical plant.

5

Total Cost

The cost of all the inputs a firm uses in production.

6

Variable costs

Costs which change as the quantity of output changes I.e. labour

7

Fixed costs

Costs which remain constant as the quantity of output changes

8

Total cost formula

Total cost = fixed costs + variable costs TC = FC+VC

9

Opportunity cost

The highest valued alternative that must be given up to engage in an activity.

10

Explicit cost

A cost that involves spending money

11

Implicit cost

A non monetary opportunity cost

12

Production function

The relationship between the inputs employed by the firm and the maximum output it can produce with those inputs.

13

Average total cost

Total cost divided by the quantity of input produced

14

Marginal product of labour

The additional output a firm produces as a result of hiring one more worker.

15

Law of diminishing returns

The principle that, at some point, adding more of a variable input, such as labour, to the same amount of fixed input, such as capital, will cause the marginal product of the variable to decline.

16

Average product of labour

The total output produced by a firm divided by the quantity of workers.

17

Marginal cost

The additional cost to a firm of producing one more unit of a good or service. MC = CHANGE IN TC/CHANGE IN QTY

18

When the marginal product of labour is rising, the marginal cost of output will be falling.

When the marginal product of labour is falling, the marginal cost of production will be rising.

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Diseconomies of scale

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Cost Curve to remember

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