Microeconomics exam 2 Flashcards
(48 cards)
Short run
at least one of firms inputs (labour or capital) is fixed
Long run
None of firms inputs to production are fixed
Diminishing returns
as successive units of variable input are added and all other inputs are fixed, then the marginal product of that inout with decrease beyond some amount of that variable input
Inputs to production
resources used to create goods and services - land, labour, capital
Total product
Total amount go good a firm produced
Marginal Product of an input
Additional output associated with additional unit of an input - total quantity / total unit of input
Average input of a product
output per unit of an input
Explicit cost
Monetary payments a firm makes to those from whom it purchases resources it doesn’t own
Implicit cost
Opportunity cost of using resources the firm already owns
total fixed cost
does not change wot output, arises from fixed input
total variable cost
costs that do not change with output
total cost
Total variable + Total fixed cost
average fixed cost
TFC / Q
average variable cost
TVC / Q
average total cost
TC / Q or AVC + AFC
marginal cost
Additional cost to produce next unit of output
= ATC / Total Q = ATVC / Total Q
constant returns to scale
economies of scale
Feature of the firms technology that causes the long run average to decrease
labour specialisation
Results in decrease long run costs
cube square rule
doubling down size does not necessarily equal doubling the cost
technological tradeoff
Some technologies are cost minimising only at larger quantities of output
indivisibilities of capital
cost of unused capacity is spread over more units of production: some items cannot be halved
diseconomies of scale
feature of the firms technology that causes the long run average cost to increase
monitoring costs
more resources must be used to keep workers on task as more workers are hired
