Term
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Definition
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Term
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Definition
indicates the highest output q that a firm can produce for every specified combination of inputs
- q=F(K,L) |
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Definition
| period of time in which the quantities of one or more factors of production cannot be changed. at least one fixed cost |
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| amount of time needed to make all inputs variable |
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Definition
- output per unit of labor input
- q/L |
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Term
| marginal product of labor (MPL) |
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Definition
additional output produced as the labor input is increased by 1 unit
- (chnage in q)/(change in L) |
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Term
| law of diminishing marginal returns |
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Definition
| as the use of an input increases in equal increments (other inputs fixed), a point will eventually be reached at which the resulting additions to output decrease |
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Definition
| the average product of labor for an entire industry or for the economy as a whole |
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Definition
| the total amount of capital available for use in production |
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Definition
| development of new technologies allowing factors of production to be used more effectively |
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Definition
| curve showing all possible combinations of inputs that yield the same output |
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Term
| marginal rate of technical substitution (MRTS) |
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Definition
amount by which the quantity of one input can be reduced when one extra unit of another input is used, so that output remains constant
- slope of isoquant |
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Term
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Definition
| (change in K)/(change in L) |
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Term
| the ratio of the marginal products of the inputs is |
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Definition
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Term
| fixed proportions production |
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Definition
| production function with L-shaped isoquants, so that only one combination of labor and capital can be used to produce each level of output |
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Term
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Definition
| rate at which output increases as inputs are increased proportionately |
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Term
| increasing returns to scale |
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Definition
| situation in which output more than doubles when all inputs are doubled |
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Term
| constant returns to scale |
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Definition
| output doubles when all inputs are doubled |
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Term
| decreasing returns to scale |
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Definition
| output less than doubles when all inputs are doubled |
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Term
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Definition
| actual expenses plus depreciation charges for capital equipment |
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Term
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Definition
| cost to a firm of utilizing economic resources in production including opportunity costs |
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Term
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Definition
| cost associated with opportunities that are forgone when a firms resources are not put in their best alternative use |
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Term
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Definition
| expenditure that has been made and cannot be recovered |
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Term
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Definition
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Term
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Definition
| total economic cost of production, consisting of fixed and variable costs |
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Term
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Definition
| cost that does not vary with the level of output and that can be eliminated only by shutting down |
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Definition
| cost that varies as output varies |
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Definition
| increase in cost resulting from the production of one extra unit of output |
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Term
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Definition
MC=(change in VC)/(change in q)
which is the same as
MC=(change in TC)/(change in q) |
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Term
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Definition
fixed cost divided by the level of output
AFC=FC/q |
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Term
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Definition
variable cost divided by q
VC/q |
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Term
| marginal cost using the wage rate |
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Definition
MC=w/MPL
w=wage rage
MPL=(change in L)/(change in q) |
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Term
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Definition
| annual cost of owning and using a capital asset, equal to the economic depreciation plus forgone interest |
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Term
| user cost of capital formula |
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Definition
| =(economic depreciation)+(int rate)(value of capital) |
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Term
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Definition
| deprecation rate + interest rate |
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Term
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Definition
| shows all possible combinations of labor and capital that can be purchased for a given total cost |
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Definition
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Definition
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Definition
| curve passing through points of tangency between firms isocost and isoquant lines |
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Term
| long run average cost curve |
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Definition
| curve relating average cost of production to output when all inputs, including capital are variable |
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Term
| short run average cost curve |
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Definition
| curve relating average cost of production to output when level of capital is fixed |
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Term
| long run marginal cost curve |
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Definition
| curve showing the change in long run total cost as output is increased incrementally by 1 unit |
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Term
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Definition
| output can be doubled for less than a doubling of cost |
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Term
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Definition
| doubling of output requires more than a doubling of cost |
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Term
| product transformation curves |
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Definition
| curve showing the various combinations of 2 different outputs that can be produced with a given set of inputs |
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Term
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Definition
| joint output of a single firm is greater than output that could be achieved by 2 different firms when each produces a single product |
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Term
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Definition
| joint output of a single firm is less than could be achieved by separate firms when each produces a single product |
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Term
| perfect market assumptions |
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Definition
1) price taking
2) product homogeneity
3) free entry and exit |
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Term
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Definition
| association of businesses or people jointly owned and operated by members for mutual benefit |
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Definition
| difference between total revenue and total cost |
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