# Shared Flashcard Set

## Details

Chapter 11
16
Economics
11/18/2015

Term
 Average Fixed Cost (AFC)
Definition
 is total fixed cost per unit of output.
Term
 Average Variable Cost (AVC)
Definition
 is total variable cost per unit of output.
Term
 Average Total Cost (ATC)
Definition
 is total cost per unit of output.
Term
 Total product
Definition
 Total product is the maximum outputthat a given quantity of labour can produce.
Term
 marginal product
Definition
 The marginal product of labour is the increase intotal product that results from a one-unit increase inthe quantity of labour employed, with all other inputsremaining the same.
Term
 average product
Definition
 tells how productive workers are on average.
Term
 long run
Definition
 a time frame in which the quantities ofall factors of production can be varied.
Term
 short run
Definition
 is a time frame in which the quantityof at least one factor of production is fixed.
Term
 total product curve
Definition
 [image] The total product curve is similar to the productionpossibilities frontier.It separates the attainable output levels from thosethat are unattainable. All the points that lie abovethe curve are unattainable. Points that lie below thecurve, in the orange area, are attainable, but they areinefficient—they use more labour than is necessary toproduce a given output. Only the points on the totalproduct curve are technologically efficient.
Term
 diminishing marginal returns
Definition
 occur when the marginal product of an additionalworker is less than the marginal product of theprevious worker.
Term
 laws of diminishing returns
Definition
 states that: As a fi rm uses more of a variable factor ofproduction with a given quantity of the fi xedfactor of production, the marginal product ofthe variable factor eventually diminishes.
Term
 marginal cost curve ( MC )
Definition
 intersects the average variable cost curve and the average total cost curve at their minimum points .
Term
 Decision Tim Frames
Definition
 ■ In the short run, the quantity of at least one factorof production is fixed and the quantities of the other factors of production can be varied. ■ In the long run, the quantities of all factors ofproduction can be varied.
Term
 Short-Run Technology Constraint
Definition
 ■ A total product curve shows the quantity a firmcan produce with a given quantity of capital anddifferent quantities of labour.■ Initially, the marginal product of labour increasesas the quantity of labour increases, because ofincreased specialization and the division of labour.■ Eventually, marginal product diminishes becausean increasing quantity of labour must share a fixedquantity of capital—the law of diminishing returns.■ Initially, average product increases as the quantityof labour increases, but eventually average productdiminishes.
Term
 Short-Run Cost
Definition
 ■ As output increases, total fixed cost is constant,and total variable cost and total cost increase. ■ As output increases, average fixed cost decreasesand average variable cost, average total cost,and marginal cost decrease at low outputs andincrease at high outputs. These cost curves areU-shaped.
Term
 Long Run Cost
Definition
 ■ A firm has a set of short-run cost curves for eachdifferent plant. For each output, the firm hasone least-cost plant. The larger the output, thelarger is the plant that will minimize averagetotal cost. ■ The long-run average cost curve traces out thelowest attainable average total cost at each outputwhen both capital and labour inputs can bevaried. ■ With economies of scale, the long-run averagecost curve slopes downward. With diseconomiesof scale, the long-run average cost-curve slopes upward.   see p. 260-263
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