Economics for Managers Chapter 5 Flashcards Preview

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Flashcards in Economics for Managers Chapter 5 Deck (27)
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1
Q

Production Function

A

The relationship between a flow of inputs and the resulting flow of outputs in a production process during a given period of time.

2
Q

Fixed Input

A

An input whose quantity a manager cannot change during a given period of time.

3
Q

Variable Input

A

An input whose quantity a manager can change during a given period of time.

4
Q

Short-run Production Function

A

A production process that uses at least one fixed input.

5
Q

Long-run Production Function

A

A production process in which all inputs are variable.

6
Q

Total Product

A

The total quantity of output produced with given quantities of fixed and variable inputs.

7
Q

Average Product

A

The amount of output per unit of variable input.

8
Q

Marginal Product

A

The additional output produced with an additional unit of variable input.

9
Q

Increasing Marginal Returns

A

The results in that region of the marginal product curve where the curve is positive and increasing, so that total product increases at an increasing rate.

10
Q

Law of Diminishing Marginal Returns or Law of the Diminishing Marginal Product

A

The phenomenon illustrated by that region of the marginal product curve where the curve is positive, but decreasing, so that total product is increasing at a decreasing rate.

11
Q

Negative Marginal Returns

A

The results in that region of the marginal product curve where the curve is negative and decreasing, so that total product is decreasing.

12
Q

Cost Function

A

A mathematical or graphic expression that shows the relationship between the cost of production and the level of output, all other factors held constant.

13
Q

Opportunity Cost

A

The economic measure of cost that reflects the use of resources in one activity, such as a production process by one firm, in terms of the opportunities forgone in undertaking the next best alternative activity.

14
Q

Explicit Cost

A

A cost that is reflected in a payment to another individual, such as a wage paid to a worker, that is recorded in a firm’s bookkeeping or accounting system.

15
Q

Implicit Cost

A

A cost that represents the value of using a resource that is not explicitly paid out and is often difficult to measure because it is typically not recorded in a firm’s accounting system.

16
Q

Historical Cost

A

The amount of money a firm paid for an input when it was purchased, which for machines and capital equipment could have occurred many years in the past.

17
Q

Profit

A

The difference between the total revenue a firm receives from the sale of its output and the total cost of producing that output.

18
Q

Accounting Profit

A

The difference between total revenue and total cost where cost included only the explicit costs of production.

19
Q

Economic Profit

A

The difference between total revenue and total cost where cost included both the explicit and any implicit costs of production.

20
Q

Short-run Cost Function

A

A cost function for a short-run production process in which there is at least one fixed input of production.

21
Q

Total Fixed Cost

A

The total cost of using the fixed input, which remains constant regardless of the amount of output produced.

22
Q

Total Variable Cost

A

The total cost of using the variable input, which increases as more output is produced.

23
Q

Total Cost

A

The sum of the total fixed cost plus the total variable cost.

24
Q

Average Fixed Cost

A

The total fixed cost per unit of output.

25
Q

Average Variable Cost

A

The total variable cost per unit of output.

26
Q

Average Total Cost

A

The total cost per unit of output, which also equals average fixed cost plus average variable cost.

27
Q

Marginal Cost

A

The additional cost of producing an additional unit of output, which equals the change in total cost or the change in total variable cost as output changes.