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31 Cards in this Set
- Front
- Back
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A period of time over which at least one input is fixed.
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Short Run
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All inputs are variable
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Long Run
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The total amount produced by a firm
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Total product
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Another name for total product
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quantity of output
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The additional output that is produced when one additional unit of the input is used
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Marginal product
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Any variable input is equal to the total product, divided by the amount of that variable input.
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Average product
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States that, when we increase one variable input, holding constant all other inputs, the marginal product of that variable input will eventually decrease.
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The law of Diminishing Returns or Law of Diminishing Marginal Product
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the cost of variable inputs
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Variable Cost
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The total of all of the payments to variable inputs
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Total Variable Cost
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The cost of the fixed inputs
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Fixed Cost
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The total of all payments to fixed inputs
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Total Fixed Cost
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Total Variable Cost plus Total Fixed Cost
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Total Cost
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Total Fixed Cost divided by Q
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Average Fixed Cost
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Total Variable Cost divided by Q
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Average Variable Cost
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Total Cost divided by Q
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Average Total Cost
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Average Fixed Cost plus Average Variable Cost
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Average Total Cost
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The additional cost that is necessary to produce one additional unit of output
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Marginal Cost
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Average total cost minus Average variable Cost
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Average Fixed Cost
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We increase al inputs by the same proportion, and see what happens to the quantity of output.
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returns to scale
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the percentage increase in output is greater than the percentage increase in inputs
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Increasing returns to scale or economies of scale
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When the percentage change in output is the same as the percentage change in all inputs.
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Constant returns to scale
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When the percentage increase in output is less than the percentage increase in all inputs
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Decreasing returns to scale or diseconomies of scale
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When the firm no longer has increasing returns to scale.
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Minimum efficient scale
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If the profits are high new firms will enter the industry
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Free entry
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If the firms have negative economic profits some of them will go out of business.
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Free exit
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The opposite end of the spectrum in which their is only one firm in an industry.
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Monopoly
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the market has many firms and each firm is small relative to the market
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Perfect Competition.
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Two categories of the "in between" market structures
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monopolistic competition and oligopoly
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Is the same as perfect competition except the firms have differentiated products.
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Monopolistic Competition
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when a market has only a few firms
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Oligopoly
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when oligopolistic firms cooperate with each other, we say they are engaged in
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collusion
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