AP Micro Unit 4 Terms

question

Production Function

answer

shows the relationship between a firms variable inputs and its outputs

question

Variable Inputs

answer

can be increased to increased production

question

Fixed Inputs

answer

cannot be increased to increase production

question

Short Run

answer

at least one input is fixed. the time period that is too brief for a firm to alter its plant size (capital is fixed)

question

Long Run

answer

all inputs may be variable. a period that is long enough for a firm to vary all inputs, including capital

question

Total Product (TP or Q)

answer

the total output produced by the firm

question

Marginal Product (MP)

answer

The additional output produced by hiring one more unit of input

-MPL = changeTP/changeL

-MPC = changeTP/changeC

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Average Product (AP)

answer

the total product divided by the total number of inputs

question

Diminishing Returns to an Input

answer

as more and more of a variable input is added to a fixed input, at some point, the additional output produced will decline

question

Fixed Cost (FC)

answer

costs whose total does not vary with changes in output. these are payments to the fixed outputs in the production function

question

Variable Cost (VC)

answer

costs that change with the level of output these are the payments to the variable inputs in the production function

question

Total Cost (TC)

answer

the sum of the total fixed and variable costs at each level of output

-TC= FC+VC

question

Total Cost Curve

answer

shows how total cost depends on quantity of output

question

Marginal Cost (MC)

answer

the additional cost of producing one more unit of output

question

Average Total Cost

answer

the total cost divided by the level of output

question

U-shaped average total cost curve

answer

falls at low levels of output, then rises at higher levels

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Average Fixed Cost (AFC)

answer

the fixed cost per unit of output

-FC/Q

question

Average Variable Cost (AVC)

answer

the variable cost per unit of output

-VC/Q

question

minimum-cost output

answer

the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.

question

long-run average cost curve

answer

shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

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economies of scale

answer

when long-run average total cost declines as output increases

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increasing returns to scale

answer

when output increases more than in proportion to an increase in all inputs

question

minimum efficient scale

answer

the smallest quantity at which a firm's long-run average total cost is minimized

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diseconomies of scale

answer

when long-run average total cost increases as output increases

question

decreasing returns to scale

answer

when output increases less than in proportion to an increase in all inputs

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constant returns to scale

answer

when output increases directly in proportion to an increase in all inputs

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sunk cost

answer

a cost that has been incurred in the past and cannot be recovered

question

cost-minimization rule

answer

employ factors so that the marginal product per dollar spent on each factor is the same

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question

Production Function

answer

shows the relationship between a firms variable inputs and its outputs

question

Variable Inputs

answer

can be increased to increased production

question

Fixed Inputs

answer

cannot be increased to increase production

question

Short Run

answer

at least one input is fixed. the time period that is too brief for a firm to alter its plant size (capital is fixed)

question

Long Run

answer

all inputs may be variable. a period that is long enough for a firm to vary all inputs, including capital

question

Total Product (TP or Q)

answer

the total output produced by the firm

question

Marginal Product (MP)

answer

The additional output produced by hiring one more unit of input

-MPL = changeTP/changeL

-MPC = changeTP/changeC

question

Average Product (AP)

answer

the total product divided by the total number of inputs

question

Diminishing Returns to an Input

answer

as more and more of a variable input is added to a fixed input, at some point, the additional output produced will decline

question

Fixed Cost (FC)

answer

costs whose total does not vary with changes in output. these are payments to the fixed outputs in the production function

question

Variable Cost (VC)

answer

costs that change with the level of output these are the payments to the variable inputs in the production function

question

Total Cost (TC)

answer

the sum of the total fixed and variable costs at each level of output

-TC= FC+VC

question

Total Cost Curve

answer

shows how total cost depends on quantity of output

question

Marginal Cost (MC)

answer

the additional cost of producing one more unit of output

question

Average Total Cost

answer

the total cost divided by the level of output

question

U-shaped average total cost curve

answer

falls at low levels of output, then rises at higher levels

question

Average Fixed Cost (AFC)

answer

the fixed cost per unit of output

-FC/Q

question

Average Variable Cost (AVC)

answer

the variable cost per unit of output

-VC/Q

question

minimum-cost output

answer

the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.

question

long-run average cost curve

answer

shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

economies of scale

answer

when long-run average total cost declines as output increases

question

increasing returns to scale

answer

when output increases more than in proportion to an increase in all inputs

question

minimum efficient scale

answer

the smallest quantity at which a firm's long-run average total cost is minimized

question

diseconomies of scale

answer

when long-run average total cost increases as output increases

question

decreasing returns to scale

answer

when output increases less than in proportion to an increase in all inputs

question

constant returns to scale

answer

when output increases directly in proportion to an increase in all inputs

question

sunk cost

answer

a cost that has been incurred in the past and cannot be recovered

question

cost-minimization rule

answer

employ factors so that the marginal product per dollar spent on each factor is the same

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AP Micro Unit 4 Terms

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