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# Ch 11 micro

question
The basic activity of a firm is
to use inputs to produce outputs of goods and services.
question
Inputs =
Workers, machines, natural resources, etc.
question
Technology=
The processes a firm uses to turn inputs into outputs of goods and services.
question
If a firm improves its ability to turn inputs into outputs, we refer to this as
Positive technological change.
question
Technological change
A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.
question
The short-run period
Period of time during which at least one of a firm's inputs is fixed.
question
Long run period
The firm can vary its inputs, adopt new technology, and increase or decrease the size of its physical plant.
question
Variable costs
are costs that change as output changes.
question
Fixed costs
are costs that remain constant as output changes.
question
Total cost=
Fixed cost +Variable cost
question
Explicit cost
a cost that involves spending money.
question
Implicit cost
a non-monetary opportunity cost.
question
economic depreciation
decrease in resale value.
question
production function
the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs.
question
average total cost=
TC/ Q
question
For low levels of production,
the average cost falls as the number of pizzas rises.
question
at higher levels,
The average cost rises as the number of pizzas rises.
question
The "falling-then-rising"nature of average total costs results in a
U-shaped average total cost curve.
question
Law of diminishing returns
The principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline.
question
When the marginal product of labor is increasing,
Total output increases at an increasing rate.
question
When the marginal product of labor is decreasing, but still positive
Total input increases, but at a decreasing rate.
question
The output curve flattening out, and the decreasing marginal product curve, both illustrate
the law of diminishing returns.
question
APL=
Q/L
question
marginal cost=
the change in a firm's total cost from producing one more unit of a good or service (MC= CHANGE TC/CHANGE Q.
question
AFC=
FC/Q
question
AVC
VC/Q
question
the vertical sum of the AVC and AFC curves is
ATC curve
question
because AFC gets smaller,
the ATC and AVC curves converge.
question
A long-run average cost curve shows
The lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed.
question
economies of scale
The firm's long-run average costs falling as it increases the quantity of output it produces.
question
The lowest level of output which all economies of scale are exhausted is known as the
minimum efficient scale.
question
constant returns to scale
its long-run average cost remains unchanged as it increases output.
question
diseconomies of scale
a situation in which a firm's long-run average costs rise as the firm increases output.
question
Feasible=
data outside line.
question
not feasible
data inside line.
question
If the cost of the next unit (MC) is less than the ATC than...
ATC is decreasing.
question
If MC is greater than ATC than...
ATC is increasing.
question
If MC = ATC, than...
ATC is neither increasing nor decreasing.
question
Firms want to maintain low what
ATC.
question
LRAC=
Long run avg cost.
question
MPL
change in Q/change in L
question
MC=
change in TC/change in Q
1 of 42
question
The basic activity of a firm is
to use inputs to produce outputs of goods and services.
question
Inputs =
Workers, machines, natural resources, etc.
question
Technology=
The processes a firm uses to turn inputs into outputs of goods and services.
question
If a firm improves its ability to turn inputs into outputs, we refer to this as
Positive technological change.
question
Technological change
A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.
question
The short-run period
Period of time during which at least one of a firm's inputs is fixed.
question
Long run period
The firm can vary its inputs, adopt new technology, and increase or decrease the size of its physical plant.
question
Variable costs
are costs that change as output changes.
question
Fixed costs
are costs that remain constant as output changes.
question
Total cost=
Fixed cost +Variable cost
question
Explicit cost
a cost that involves spending money.
question
Implicit cost
a non-monetary opportunity cost.
question
economic depreciation
decrease in resale value.
question
production function
the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs.
question
average total cost=
TC/ Q
question
For low levels of production,
the average cost falls as the number of pizzas rises.
question
at higher levels,
The average cost rises as the number of pizzas rises.
question
The "falling-then-rising"nature of average total costs results in a
U-shaped average total cost curve.
question
Law of diminishing returns
The principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline.
question
When the marginal product of labor is increasing,
Total output increases at an increasing rate.
question
When the marginal product of labor is decreasing, but still positive
Total input increases, but at a decreasing rate.
question
The output curve flattening out, and the decreasing marginal product curve, both illustrate
the law of diminishing returns.
question
APL=
Q/L
question
marginal cost=
the change in a firm's total cost from producing one more unit of a good or service (MC= CHANGE TC/CHANGE Q.
question
AFC=
FC/Q
question
AVC
VC/Q
question
the vertical sum of the AVC and AFC curves is
ATC curve
question
because AFC gets smaller,
the ATC and AVC curves converge.
question
A long-run average cost curve shows
The lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed.
question
economies of scale
The firm's long-run average costs falling as it increases the quantity of output it produces.
question
The lowest level of output which all economies of scale are exhausted is known as the
minimum efficient scale.
question
constant returns to scale
its long-run average cost remains unchanged as it increases output.
question
diseconomies of scale
a situation in which a firm's long-run average costs rise as the firm increases output.
question
Feasible=
data outside line.
question
not feasible
data inside line.
question
If the cost of the next unit (MC) is less than the ATC than...
ATC is decreasing.
question
If MC is greater than ATC than...
ATC is increasing.
question
If MC = ATC, than...
ATC is neither increasing nor decreasing.
question
Firms want to maintain low what
ATC.
question
LRAC=
Long run avg cost.
question
MPL
change in Q/change in L
question
MC=
change in TC/change in Q

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