Term
What was the previous day based around?
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Definition
Short Run Costs Specifically
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Term
What is today based around?
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Definition
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Term
In the long run all inputs, plant size, and all costs are what?
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Definition
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Term
What may an entrepreneur face during the long run, given that plant size is variable?
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Definition
A variety of possible plant sizes.
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Term
On a graph of multiple average total cost curves in the short run, given that each curve is drawn under the assumption of a particular fixed plant size, what does each short run average total cost curve represent?
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Definition
A distinct possible plant size
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Term
What does the choice of plant size depend on?
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Definition
The profit maximizing plant size, which has the most optimal output level.
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Term
If demand for a firm's product is increasing, then the firm in order to keep up with demand should produce more or less of said product?
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Definition
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Term
If demand for a firm's product is decreasing, then the firm in order to keep up with demand should produce more or less of said product?
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Definition
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Term
On a graph with multiple average total cost curves in the short run, the higher the curve goes, the higher what is?
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Definition
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Term
On a graph with multiple average total cost curves in the short run, the further to the right the curve goes, the higher what is?
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Definition
The quantity produced of product
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Term
The points at the bottom of an Average Total Cost Curve, are what?
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Definition
The most efficient points of production
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Term
What is the definition of a Long Run Average Total Cost Curve?
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Definition
A curve that illustrates the lowest average cost of production, at each level of production, when the firm's plant size is variable.
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Term
Every point on the long run average total cost curve, comes from what?
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Definition
An average total cost short run curve.
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Term
Long run average total cost curves cannot be any more what, than it already is for its particular plant size?
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Definition
Efficient/Optimal
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Term
Every point of the long run average total cost curve, is its own what?
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Definition
Plant Size
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Term
What is the definition of Economies of Scale?
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Definition
Forces that cause reduction in a firm's average total cost, as the scale of production is increased in the long run.
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Term
Are there capacity constraints in the Long Run?
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Definition
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Term
What are economies?
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Definition
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Term
Why are Average Total Cost Curves, "U"-shaped?
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Definition
Economies of Scale
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Term
What is the primary cause of scale economies?
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Definition
The larger the size of a firm, the greater the total costs, the easier a firm is able to specialize, which allows a firm to become more efficient, and to therefore yield lower average costs.
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Term
What is the definition of capital specialization?
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Definition
Some production must occur at large size to make efficient use of specialized capital.
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Term
When do Diseconomies of scale arise?
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Definition
When Average total cost rise as the scale of production in the long run increases.
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When a firm becomes too big to manage efficiently.
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Term
What is the minimum point of the average total cost curve in the long run (which is a parabola)?
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Definition
It is a point that marks the transition from economies of scale to the diseconomies of scale. The left side of the minimum point, represents economies of scale, while the right side represents diseconomies of scale.
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Term
What is the definition of minimum efficient scale?
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Definition
The smallest level of output at which a firm minimizes, long run average costs, which varies by firm/industry.
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Term
What is the minimum point of the average total cost curve in the long run (which is a parabola)?
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Definition
It is a point that marks the transition from economies of scale to the diseconomies of scale. The left side of the minimum point, represents economies of scale, while the right side represents diseconomies of scale.
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Term
What is the definition of minimum efficient scale?
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Definition
The smallest level of output at which a firm minimizes, long run average costs, which varies by firm/industry.
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Term
There are very few large firms, so how much competition do they have?
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Definition
Not very much
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Term
There are very many small firms, so how much competition do they have?
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Definition
A large number
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Term
What do constant returns to scale describe?
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Definition
The efficient coexistence of small and large firms.
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