Term
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Definition
| Organizations that produce goods and services. |
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Term
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Definition
| 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 |
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Definition
| A factor of production whose quantity cannot be changed during a particular period. |
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| Variable Factor of Production |
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Definition
| A factor of production whose quantity can be changed during a particular period. |
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Definition
| The planning period over which a firm can consider all factors of production as variable. |
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Definition
| The relationship between factors of production and the output of a firm. |
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Definition
| 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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Definition
| The amount by which output rises with an additional unit of a variable factor. |
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Term
| Marginal Product of Labor |
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Definition
| The amount by which output rises with an additional unit of labor. |
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Definition
| The output per unit of variable factor. |
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Definition
| The ratio of output to the number of units of labor (Q/L). |
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Term
| Increasing Marginal Returns |
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Definition
| The range over which each additional unit of a variable factor adds more to total output than the previous unit. |
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Term
| Diminishing Marginal Returns |
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Definition
| The range over which each additional unit of a variable factor adds more to total output than the previous unit. |
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Term
| Negative Marginal Returns |
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Definition
| The range over which additional units of a variable factor reduce total output, given constant quantities of all other variable factors. |
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Term
| Law of Diminishing Marginal Returns |
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Definition
| 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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Term
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Definition
| The costs associated with the use of variable factors of production. |
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Term
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Definition
| The costs associated with the use of fixed factors of production. |
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Term
| Total Variable Cost (TVC) |
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Definition
| Cost that varies with the level of output. |
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Term
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Definition
| Cost that does not vary with output. |
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Term
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Definition
| Sum of total variable cost and total fixed cost. |
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Term
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Definition
| Total cost divided by quantity; it is the firm’s total cost per unit of output. |
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Term
| Average Variable Cost (AVC) |
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Definition
| Total variable cost divided by quantity; it is the firm's total cost per unit of output. |
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Term
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Definition
| Total fixed cost divided by quantity. |
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Term
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Definition
| Situation in which a firm has a high ratio of capital to labor. |
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Term
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Definition
| Situation in which a firm has a high ratio of labor to capital. |
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Term
| Long-Run Average Cost (LRAC) Curve |
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Definition
| Graph showing the firm’s lowest cost per unit at each level of output, assuming that all factors of production are variable. |
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Term
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Definition
| Situation in which the long-run average cost declines as the firm expands its output. |
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Term
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Definition
| Situation in which the long-run average cost increases as the firm expands its output. |
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Term
| Constant Returns to Scale |
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Definition
| Situation in which the long-run average cost stays the same over an output range. |
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