Econ chapter 12 Final - Custom Scholars
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# Econ chapter 12 Final

question
Labour =
L
question
Capital =
K
question
Natural resources =
N
question
output =
Q
question
Technology
the processes a firm uses to turn inputs into outputs of goods and services
question
production function
is the relationship between the inputs employed by a firm and the maximum output (Q) it can produce with those inputs
question
short run
is a time frame in which the quantity of at least one ofa firm's inputs used in production is fixed
question
long run
is a time frame in which the quantities of all inputs -including the size of a firm's physical plant - can be varied
question
to increase output in the short run
firms must increase amount of labor employed
question
total product
is the total output produced in a given period
question
marginal product
of labor is the increase in output that arises from an additional unit of labor employed, with all other inputs remaining the same
question
average product
of labor is equal to total product divided by the quantity of labor employed
question
increasing marginal returns
arise from increased specialization and division of labor
question
diminishing marginal returns
arises because each additional worker has less access to capital and less space in which to work
question
law of diminishing returns
As a firm uses more of a variable input with a given quantity of fixed inputs, the marginal product of the variable input eventually diminishes
question
when marginal product exceeds average product
average product increases
question
when marginal product is below average product
average product decreases
question
when marginal product equal average product
average product is at its maximum
question
3 cost curves
- total cost
- marginal cost
- average cost
question
fixed cost
is the cost of the firm's fixed inputs. Fixed cost remains constant as output changes
question
variable cost
is the cost of the firm's variable inputs. Variable cost changes as output changes
question
total cost
is the cost of all the inputs a firm uses in production
question
total cost calculation
FC + VC
question
marginal cost
is the increase in total cost that results from a one-unit increase in total product
question
marginal cost calculation
change in total cost/ change in quantity of output
question
average fixed cost
is total fixed cost per unit of output
question
average variable cost
is total variable cost per unit of output
question
average total cost
is total cost per unit of output
question
AFC =
FC/Q
question
AVC =
VC/Q
question
ATC =
TC/Q
question
The AFC curve shows
that average fixed cost falls as output increases
question
the ATC curve shows
as output increases, average total cost falls to a minimum and then increases
question
for outputs over which AVC is falling
MC is below AVC
question
for outputs over which AVC is rising
MC is above AVC
question
For the output at minimum AVC
MC = AVC
question
For the outputs over which ATC is falling
MC is below ATC
question
For the outputs over which ATC is rising
MC is above ATC
question
For the output at minimum ATC
MC = ATC
question
MC is at its minimum at the same output level at which
MP is at its maximum
question
When MP is rising
MC is falling
question
AVC is at its minimum at the same output level at which
AP is at its maximum
question
When AP is rising
AVC is falling
question
in the long run inputs and costs are
variable
question
long run average costs (LRAC)
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
are features of a firm's technology that lead tofalling long-run average cost as output increases
question
diseconomies of scale
are features of a firm's technology that lead to rising long-run average cost as output increases
question
constant returns to scale
are features of a firm's technology that lead to constant long-run average cost as output increases
question
minimum efficient scale
is the smallest quantity of output at which the long-run average cost reaches its lowest level.
1 of 49
question
Labour =
L
question
Capital =
K
question
Natural resources =
N
question
output =
Q
question
Technology
the processes a firm uses to turn inputs into outputs of goods and services
question
production function
is the relationship between the inputs employed by a firm and the maximum output (Q) it can produce with those inputs
question
short run
is a time frame in which the quantity of at least one ofa firm's inputs used in production is fixed
question
long run
is a time frame in which the quantities of all inputs -including the size of a firm's physical plant - can be varied
question
to increase output in the short run
firms must increase amount of labor employed
question
total product
is the total output produced in a given period
question
marginal product
of labor is the increase in output that arises from an additional unit of labor employed, with all other inputs remaining the same
question
average product
of labor is equal to total product divided by the quantity of labor employed
question
increasing marginal returns
arise from increased specialization and division of labor
question
diminishing marginal returns
arises because each additional worker has less access to capital and less space in which to work
question
law of diminishing returns
As a firm uses more of a variable input with a given quantity of fixed inputs, the marginal product of the variable input eventually diminishes
question
when marginal product exceeds average product
average product increases
question
when marginal product is below average product
average product decreases
question
when marginal product equal average product
average product is at its maximum
question
3 cost curves
- total cost
- marginal cost
- average cost
question
fixed cost
is the cost of the firm's fixed inputs. Fixed cost remains constant as output changes
question
variable cost
is the cost of the firm's variable inputs. Variable cost changes as output changes
question
total cost
is the cost of all the inputs a firm uses in production
question
total cost calculation
FC + VC
question
marginal cost
is the increase in total cost that results from a one-unit increase in total product
question
marginal cost calculation
change in total cost/ change in quantity of output
question
average fixed cost
is total fixed cost per unit of output
question
average variable cost
is total variable cost per unit of output
question
average total cost
is total cost per unit of output
question
AFC =
FC/Q
question
AVC =
VC/Q
question
ATC =
TC/Q
question
The AFC curve shows
that average fixed cost falls as output increases
question
the ATC curve shows
as output increases, average total cost falls to a minimum and then increases
question
for outputs over which AVC is falling
MC is below AVC
question
for outputs over which AVC is rising
MC is above AVC
question
For the output at minimum AVC
MC = AVC
question
For the outputs over which ATC is falling
MC is below ATC
question
For the outputs over which ATC is rising
MC is above ATC
question
For the output at minimum ATC
MC = ATC
question
MC is at its minimum at the same output level at which
MP is at its maximum
question
When MP is rising
MC is falling
question
AVC is at its minimum at the same output level at which
AP is at its maximum
question
When AP is rising
AVC is falling
question
in the long run inputs and costs are
variable
question
long run average costs (LRAC)
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
are features of a firm's technology that lead tofalling long-run average cost as output increases
question
diseconomies of scale
are features of a firm's technology that lead to rising long-run average cost as output increases
question
constant returns to scale
are features of a firm's technology that lead to constant long-run average cost as output increases
question
minimum efficient scale
is the smallest quantity of output at which the long-run average cost reaches its lowest level.

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