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Economics Vocab Chapter 6
Terms in this set (24)
the relationship between the quantity of inputs a firm uses and the quantity of output it produces.
an input whose quantity is fixed for a period of time and cannot be varied
an input whose quantity the firm can vary at any time
the time period in which all inputs can be varied
the time period in which at least one input is fixed
total product curve
shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input
the additional quantity of output produced by using one more unit of a given input.
diminishing returns to an input
the effect when an increase in the quantity of an input, while holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input
a cost that does not depend on the quantity of output produced; the cost of a fixed input
a cost that depends on the quantity of output produced; the cost of a variable input
the sum of the fixed cost and the variable cost of producing a given quantity of output
total cost curve
a graphical representation of the total cost, showing how total cost depends on the quantity of output.
the additional cost incurred by producing one more unit of a good or service
average total cost
total cost divided by quantity of output produced. Also referred to as average cost
an alternative term for average total cost; the total cost divided by the quantity of output produced
U-shaped average total cost curve
a distinctive graphical representation of the relationship between output and average total cost; the average total cost curve falls at low levels of output, then rises at higher levels
average fixed cost
the fixed cost per unit of output.
average variable cost
the variable cost per unit of output.
the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve
long-run average total cost curve
a graphical representation showing the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output
increasing returns to scale
long-run average total cost declines as output increases.
decreasing returns to scale
long-run average total cost increases as output increases
constant returns to scale
long-run average total cost is constant as output increases
the increase in the value of a good to an individual is greater when a large number of others own or use the same good