Term
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Definition
| the processes a firm uses to turn inputs into outputs of goods and services |
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Term
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Definition
| a change in the ability of a firm to produce a given level of output with a given quantity of inputs |
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Term
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Definition
| the period of time during which at least one of the firm's inputs is fixed |
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Term
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Definition
| a period of time long enough to allow a firm to vary all of its inputs, to adopt new technology, and to increase or decrease the size of its physical plant |
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Term
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Definition
| the cost of all the inputs a firm uses in production |
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Term
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Definition
| costs that change as output changes |
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Term
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Definition
| costs that remain constant as output changes |
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Term
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Definition
a cost that involves spending money |
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Term
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Definition
| a nonmonetary opportunity cost |
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Term
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Definition
| the relationship between the inputs employed by the firm and the maximum output it can produce with those inputs |
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Term
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Definition
| total cost divided by the quantity of output produced |
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Term
| marginal product of labor |
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Definition
| the additional output a firm produces as a result of hiring one more worker |
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Term
| law of diminishing returns |
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Definition
| 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 |
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Term
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Definition
| the total output produced by a firm divided by the quantity of workers |
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Term
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Definition
| the change in a firm's total cost from producing one more unit of a good or service |
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Term
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Definition
| fixed cost divided by the quantity of output produced |
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Term
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Definition
| variable cost divided by the quantity of units produced |
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Term
| long-run average cost curve |
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Definition
| a curve showing the lowest cost at which the firm is able to produce a given quantity of output in the long run, when no inputs are fixed |
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Term
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Definition
| exist when a firm's long-run average costs fall as it increases output |
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Term
| constant returns to scale |
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Definition
| exist when a firm's long-run average costs remain unchanged as it increases output |
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Term
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Definition
| the level of output at which all economies of scale have been exhausted |
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Term
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Definition
| exist when a firm's long-run average costs rise as it increases output |
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Term
| perfectly competitive market |
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Definition
a market that meets the conditions of
1) many buyers and sellers
2) all firms selling identical products
3) no barriers to new firms entering the market |
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Term
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Definition
| a buyer or seller that is unable to affect the market price |
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Term
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Definition
| total revenue minus total cost |
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Term
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Definition
| total revenue divdided by the number of units sold |
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Term
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Definition
| change in total revenue from selling one more unit |
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Term
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Definition
| a cost that has already been paid and that cannot be recovered |
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Term
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Definition
| the minimum point on a firm's average variable cost curve; if the price falls below this point, the firm shuts down production in the short run |
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Term
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Definition
| a firm's revenues minus all its costs, implicit and explicit |
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Term
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Definition
| the situation in which a firm's total revenue is less than its total cost, including all implicit costs |
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Term
| long-run competitive equilibrium |
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Definition
| the situation in which the entry and exit of firms has resulted in the typical firm breaking even |
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Term
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Definition
| a curve showing the relationship in the long run between market price and the quantity supplied |
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Term
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Definition
| the situation in which a good or service is produced at the lowest possible cost |
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Term
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Definition
| a state of the economy in which production reflects consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it |
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