Term
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Definition
| A period of time where at least one factor of production is assumed to be in fixed supply i.e. it cannot be changed. |
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Term
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Definition
| A period of time where all factors of production are variable and can be changed. |
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Term
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Definition
| Fixed factors are factors of production whose levels are held fixed in a time period and whose services do not vary with the amount of output produced. This is usually the case only in the short run. |
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Term
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Definition
| Inputs whose quantity can be changed in the time period under consideration. A variable factor of production provides the extra inputs that a firm needs to expand short-run production. eg. Labor |
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Term
| Law of Diminishing Returns |
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Definition
| Is the decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant. |
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Term
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Definition
MC is the increase in total cost of producing an extra unit of output.
MC=ΔTC/Δq
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Term
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Definition
is the extra output that produced by using an extra unit of the variable factor.
MP=ΔTP/ΔV where ΔTP=change in total ouput and ΔV= change in the number of units of the variable factor employed. |
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Term
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Definition
is the total cost per unit of output. It is equal to AFC plus AVC.
ATC=TC/q where q is the level of ouput. |
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Term
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Definition
is the variable cost per unit of output.
AVC=TVC/q where q= level of output. |
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Definition
is the fixed cost per unit of output.
AFC=TFC/q where q= level of output. |
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Definition
| are any falls in long run average costs that come about when a firm alters all of its factors of production in order to increase its scale of output. They lead to the firm experiencing returns to scale. |
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Term
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Definition
| are any increase in long run average cost that come about when a firm alters all of its factors of production in order to increase its scale of output. They lead to the firm experiencing decresing returns to scale. |
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Term
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Definition
| Is the difference between a firm's total revenue and its opportunity costs. |
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Term
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Definition
| is profit that exceeds normal profit (defined as equal to opportunity cost of labour and capital) |
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