(Microeconomics) Chapter 8 Terms - Custom Scholars
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(Microeconomics) Chapter 8 Terms

question
short run
answer
A planning period over which the managers of a firm must consider one or more of their factors of production as fixed in quantity.
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fixed factor of production
answer
A factor of production whose quantity cannot be changed during a particular period.
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variable factor of production
answer
A factor of production whose quantity can be changed during a particular period.
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long run
answer
The planning period over which a firm can consider all factors of production as variable.
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production function
answer
The relationship between factors of production and the output of a firm.
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total product curve
answer
Graph that shows the quantities of output that can be obtained from different amounts of a variable factor of production, assuming other factors of production are fixed.
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marginal product
answer
The amount by which output rises with an additional unit of a variable factor.
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marginal product of labor
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The amount by which output rises with an additional unit of labor.
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average product
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The output per unit of variable factor.
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average product of labor
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The ratio of output to the number of units of labor (Q/L).
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increasing marginal returns
answer
The range over which each additional unit of a variable factor adds more to total output than the previous unit.
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diminishing marginal returns
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The range over which each additional unit of a variable factor adds less to total output than the previous unit.
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negative marginal returns
answer
The range over which additional units of a variable factor reduce total output, given constant quantities of all other factors.
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law of diminishing marginal returns
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The marginal product of any variable factor of production will eventually decline, assuming the quantities of other factors of production are unchanged.
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variable costs
answer
The costs associated with the use of variable factors of production.
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fixed costs
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The costs associated with the use of fixed factors of production.
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total variable cost (TVC)
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Cost that varies with the level of output.
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total fixed cost (TFC)
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Cost that does not vary with output.
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total cost (TC)
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The sum of total variable cost and total fixed cost.
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average total cost (ATC)
answer
Total cost divided by quantity; it is the firms total cost per unit of output.
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average variable cost (AVC)
answer
Total variable cost divided by quantity; it is the firm's total variable cost per unit of output.
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average fixed cost (AFC)
answer
Total fixed cost divided by quantity.
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key takeaway image
answer
http://2012books.lardbucket.org/books/economics-principles-v1.0/section_11/844b5c9467bca07fa37785aaf0f1bedf.jpg
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1
answer
In Panel (a), the total product curve for a variable factor in the short run shows that the firm experiences increasing marginal returns from zero to Fa units of the variable factor (zero to Qa units of output), diminishing marginal returns from Fa to Fb (Qa to Qb units of output), and negative marginal returns beyond Fb units of the variable factor.
question
2
answer
Panel (b) shows that marginal product rises over the range of increasing marginal returns, falls over the range of diminishing marginal returns, and becomes negative over the range of negative marginal returns. Average product rises when marginal product is above it and falls when marginal product is below it.
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3
answer
In Panel (c), total cost rises at a decreasing rate over the range of output from zero to Qa This was the range of output that was shown in Panel (a) to exhibit increasing marginal returns. Beyond Qa, the range of diminishing marginal returns, total cost rises at an increasing rate. The total cost at zero units of output (shown as the intercept on the vertical axis) is total fixed cost.
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4
answer
Panel (d) shows that marginal cost falls over the range of increasing marginal returns, then rises over the range of diminishing marginal returns. The marginal cost curve intersects the average total cost and average variable cost curves at their lowest points. Average fixed cost falls as output increases. Note that average total cost equals average variable cost plus average fixed cost.
question
5
answer
Assuming labor is the variable factor of production, the following definitions and relations describe production and cost in the short run:
MPL=ΔQ/ΔL
APL=Q/L
TVC+TFC=TC
ATC=TC/Q
AVC=TVC/Q
AFC=TFC/Q
MC=ΔTC/ΔQ
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part 2
answer
wey hey
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capital intensive
answer
Situation in which a firm has a high ratio of capital to labor.
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labor intensive
answer
Situation in which a firm has a high ratio of labor to capital.
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long run average cost (LRAC) curve
answer
Graph showing the firms lowest cost per unit at each level of output, assuming that all factors of production are variable.
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economies of scale
answer
Situation in which the long-run average cost declines as the firm expands its output.
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diseconomies of scale
answer
Situation in which the long-run average cost increases as the firm expands its output.
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constant returns to scale
answer
Situation in which the long-run average cost stays the same over an output range.
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6
answer
A firm chooses its factor mix in the long run on the basis of the marginal decision rule; it seeks to equate the ratio of marginal product to price for all factors of production. By doing so, it minimizes the cost of producing a given level of output.
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7
answer
The long-run average cost (LRAC ) curve is derived from the average total cost curves associated with different quantities of the factor that is fixed in the short run. The LRAC curve shows the lowest cost per unit at which each quantity can be produced when all factors of production, including capital, are variable.
question
8
answer
A firm may experience economies of scale, constant returns to scale, or diseconomies of scale. Economies of scale imply a downward-sloping long-run average cost (LRAC ) curve. Constant returns to scale imply a horizontal LRAC curve. Diseconomies of scale imply an upward-sloping LRAC curve.
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9
answer
A firm's ability to exploit economies of scale is limited by the extent of market demand for its products.
question
10
answer
The range of output over which firms experience economies of scale, constant return to scale, or diseconomies of scale is an important determinant of how many firms will survive in a particular market.
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question
short run
answer
A planning period over which the managers of a firm must consider one or more of their factors of production as fixed in quantity.
question
fixed factor of production
answer
A factor of production whose quantity cannot be changed during a particular period.
question
variable factor of production
answer
A factor of production whose quantity can be changed during a particular period.
question
long run
answer
The planning period over which a firm can consider all factors of production as variable.
question
production function
answer
The relationship between factors of production and the output of a firm.
question
total product curve
answer
Graph that shows the quantities of output that can be obtained from different amounts of a variable factor of production, assuming other factors of production are fixed.
question
marginal product
answer
The amount by which output rises with an additional unit of a variable factor.
question
marginal product of labor
answer
The amount by which output rises with an additional unit of labor.
question
average product
answer
The output per unit of variable factor.
question
average product of labor
answer
The ratio of output to the number of units of labor (Q/L).
question
increasing marginal returns
answer
The range over which each additional unit of a variable factor adds more to total output than the previous unit.
question
diminishing marginal returns
answer
The range over which each additional unit of a variable factor adds less to total output than the previous unit.
question
negative marginal returns
answer
The range over which additional units of a variable factor reduce total output, given constant quantities of all other factors.
question
law of diminishing marginal returns
answer
The marginal product of any variable factor of production will eventually decline, assuming the quantities of other factors of production are unchanged.
question
variable costs
answer
The costs associated with the use of variable factors of production.
question
fixed costs
answer
The costs associated with the use of fixed factors of production.
question
total variable cost (TVC)
answer
Cost that varies with the level of output.
question
total fixed cost (TFC)
answer
Cost that does not vary with output.
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total cost (TC)
answer
The sum of total variable cost and total fixed cost.
question
average total cost (ATC)
answer
Total cost divided by quantity; it is the firms total cost per unit of output.
question
average variable cost (AVC)
answer
Total variable cost divided by quantity; it is the firm's total variable cost per unit of output.
question
average fixed cost (AFC)
answer
Total fixed cost divided by quantity.
question
key takeaway image
answer
http://2012books.lardbucket.org/books/economics-principles-v1.0/section_11/844b5c9467bca07fa37785aaf0f1bedf.jpg
question
1
answer
In Panel (a), the total product curve for a variable factor in the short run shows that the firm experiences increasing marginal returns from zero to Fa units of the variable factor (zero to Qa units of output), diminishing marginal returns from Fa to Fb (Qa to Qb units of output), and negative marginal returns beyond Fb units of the variable factor.
question
2
answer
Panel (b) shows that marginal product rises over the range of increasing marginal returns, falls over the range of diminishing marginal returns, and becomes negative over the range of negative marginal returns. Average product rises when marginal product is above it and falls when marginal product is below it.
question
3
answer
In Panel (c), total cost rises at a decreasing rate over the range of output from zero to Qa This was the range of output that was shown in Panel (a) to exhibit increasing marginal returns. Beyond Qa, the range of diminishing marginal returns, total cost rises at an increasing rate. The total cost at zero units of output (shown as the intercept on the vertical axis) is total fixed cost.
question
4
answer
Panel (d) shows that marginal cost falls over the range of increasing marginal returns, then rises over the range of diminishing marginal returns. The marginal cost curve intersects the average total cost and average variable cost curves at their lowest points. Average fixed cost falls as output increases. Note that average total cost equals average variable cost plus average fixed cost.
question
5
answer
Assuming labor is the variable factor of production, the following definitions and relations describe production and cost in the short run:
MPL=ΔQ/ΔL
APL=Q/L
TVC+TFC=TC
ATC=TC/Q
AVC=TVC/Q
AFC=TFC/Q
MC=ΔTC/ΔQ
question
part 2
answer
wey hey
question
capital intensive
answer
Situation in which a firm has a high ratio of capital to labor.
question
labor intensive
answer
Situation in which a firm has a high ratio of labor to capital.
question
long run average cost (LRAC) curve
answer
Graph showing the firms lowest cost per unit at each level of output, assuming that all factors of production are variable.
question
economies of scale
answer
Situation in which the long-run average cost declines as the firm expands its output.
question
diseconomies of scale
answer
Situation in which the long-run average cost increases as the firm expands its output.
question
constant returns to scale
answer
Situation in which the long-run average cost stays the same over an output range.
question
6
answer
A firm chooses its factor mix in the long run on the basis of the marginal decision rule; it seeks to equate the ratio of marginal product to price for all factors of production. By doing so, it minimizes the cost of producing a given level of output.
question
7
answer
The long-run average cost (LRAC ) curve is derived from the average total cost curves associated with different quantities of the factor that is fixed in the short run. The LRAC curve shows the lowest cost per unit at which each quantity can be produced when all factors of production, including capital, are variable.
question
8
answer
A firm may experience economies of scale, constant returns to scale, or diseconomies of scale. Economies of scale imply a downward-sloping long-run average cost (LRAC ) curve. Constant returns to scale imply a horizontal LRAC curve. Diseconomies of scale imply an upward-sloping LRAC curve.
question
9
answer
A firm's ability to exploit economies of scale is limited by the extent of market demand for its products.
question
10
answer
The range of output over which firms experience economies of scale, constant return to scale, or diseconomies of scale is an important determinant of how many firms will survive in a particular market.
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