Econ Exam 2- Modules 20-22 - Custom Scholars
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Econ Exam 2- Modules 20-22

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Production
process of turning inputs into outputs
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production function
the relationship between the quantity of inputs a firm uses and the quantity of output it produces
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fixed input
input whose quantity is fixed for a period and cannot be varied
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variable input
input whose quantity the firm can vary at any time
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long run
period in which all inputs can be varied
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short run
period in which at least one input is fixed
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total product curve shows
how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input
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Marginal product of labor
-change in output resulting from a one-unit increase in the amount of labor input
MPL = (change in Q/ change in L)
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total cost =
fixed cost + variable cost
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marginal cost=
change in total cost / change in quantity
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atc=
TC/Q of output
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afc=
FC/Q
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avc
VC/Q
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Increasing output has two opposing effects on average total cost:
-diminishing returns effect
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the larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost
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diminishing returns effect
the larger the output, the greater the amount of variable input required to produce additional units, leading to higher average variable cost
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Marginal cost is upward-sloping because of
diminishing returns
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The long-run average total cost curve shows
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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increasing returns to scale
when long-run average total cost declines as output increases
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decreasing returns to scale
when long-run average total cost increases as output increases
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constant returns to scale
when long-run average total cost is constant as output increases
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question
Production
process of turning inputs into outputs
question
production function
the relationship between the quantity of inputs a firm uses and the quantity of output it produces
question
fixed input
input whose quantity is fixed for a period and cannot be varied
question
variable input
input whose quantity the firm can vary at any time
question
long run
period in which all inputs can be varied
question
short run
period in which at least one input is fixed
question
total product curve shows
how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input
question
Marginal product of labor
-change in output resulting from a one-unit increase in the amount of labor input
MPL = (change in Q/ change in L)
question
total cost =
fixed cost + variable cost
question
marginal cost=
change in total cost / change in quantity
question
atc=
TC/Q of output
question
afc=
FC/Q
question
avc
VC/Q
question
Increasing output has two opposing effects on average total cost:
-diminishing returns effect
question
the larger the output, the greater the quantity of output over which fixed cost is spread, leading to lower average fixed cost
question
diminishing returns effect
the larger the output, the greater the amount of variable input required to produce additional units, leading to higher average variable cost
question
Marginal cost is upward-sloping because of
diminishing returns
question
The long-run average total cost curve shows
relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output
question
increasing returns to scale
when long-run average total cost declines as output increases
question
decreasing returns to scale
when long-run average total cost increases as output increases
question
constant returns to scale
when long-run average total cost is constant as output increases

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