# Shared Flashcard Set

## Details

Econ 302 Chapter 5
Intermediate MicroEconomics
28
Economics
03/04/2013

Term
 Production means
Definition
 Transforming productive inputs into products of greater value.
Term
 Productive Inputs (Factors of Production)
Definition
 Resources used to produce goods and services.
Term
 Production Function (Description)
Definition
 The maximum amount of output that can be produced with a given set of inputs.
Term
 Production Function (Formula)
Definition
 q = F(L, K)
Term
 Fixed Input
Definition
 An input that does not vary with the quantity produced
Term
 Variable Input
Definition
 An input that varies with the quantity produced.
Term
 Short Run
Definition
 The time horizon where some factors of production are fixed, and some are variable.
Term
 Long Run
Definition
 The time horizon where all factors of production are variable.
Term
 Law of Diminishing Marginal Returns
Definition
 With a fixed input, and an increasing variable input, at some point the marginal product of the variable input must decline.
Term
 Opportunity cost
Definition
 The next best alternative given up when making a choice.
Term
 Sunk Cost
Definition
 A cost incurred in the past that cannot be reversed.
Term
 Fixed Costs
Definition
 Costs that do not vary with the quantity of units produced.
Term
 Variable Costs
Definition
 Costs that vary with the quantity of units produced.
Term
 Short Run Cost Function (Description)
Definition
 The minimum possible cost of producing each level of output.
Term
 Short Run Cost Function (Formula)
Definition
 C = f(q)
Term
 Average Cost
Definition
 AC = C/q
Term
 Average Variable Cost
Definition
 AVC = VC/q
Term
 Marginal Cost (MC) (Description)
Definition
 The change in total cost attributable to the last unit produced
Term
 Marginal Cost (MC) (Formula)
Definition
 MC = dC/dq
Term
 The range of Diseconomies of Scale
Definition
 The range where long run average total costs increase as output increases.
Term
 The range of Constant Returns to Scale
Definition
 The range where long run average total costs remain constant as output increases.
Term
 Optimal Firm Size
Definition
 The quantity of production that minimizes long run average total costs.
Term
 An Isoquant
Definition
 A curve that shows all the input combinations that efficiently produce a given amount of output.
Term
 Marginal Rate of Technical Substitution (MRTS)
Definition
 The rate at which a producer can substitute between two inputs and maintain the same level of output.
Term
 Marginal Rate of Technical Substitution for L with K (MRTSlk) (Description)
Definition
 The number of units of capital a producer can give up in exchange for one unit of labor while maintaining the same level of output
Term
 Marginal Rate of Technical Substitution (Formula)
Definition
 -∆Y/∆x=MUx/MUy
Term
 The concept of Returns to Scale
Definition
 The effect that a proportional change in all inputs has on the level of output.
Term
 The concept of Returns to Scale means
Definition
 The effect that a proportional change in all inputs has on the level of output.
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