ch 15 MicroEconNotes

The market value of the inputs a firm uses in production

Total revenue minus total cost

Input costs that require an outlay of money by the firm

Input costs that do not require an outlay of money by the firm

Total revenue minus total cost including both explicit and implicit costs

Total revenue minus explicit cost

Economists normally assume that people start their own businesses to hel society maximize its income

When economists speak of a firm's costs, they are usually excluding opportunity costs

Implicit costs are costs that do not require an outlay of money by the firm

Accountants keep track of the money that flows into and out of firms

Accountants often ignore implicit costs

The relationship between quantity of inputs used to make a good and the quantity of output of that good

The increase in output that arises from an additional unit of input

The property of whereby the marginal product of an input declines as the quantity of the input increases

The slope of the production function

When diminishing marginal product happens the slope does what

Total cost curve gets steeper as output rises

When trying to understand the decision making process of different firms, economists assume that people think at the margin

The shape of the total cost curve is unrelated to the shape of the production function

Diminishing marginal product exists when the total cost curve becomes flatter as outputs increases

Diminishing marginal product exists when the production function becomes flatter as inputs increase

Costs that do not vary with the quantity of output produced

Costs that do vary with the quantity of output produced

Total cost divided by the quantity of output

Fixed costs divided by the quantity of output

Variable costs divided by the quantity of output

The increase in total cost that arises from an extra unit of production

Fixed costs are incurred even when a firm does not produce anything

Variable costs usually change as the firm alters the quantity of output produced

Variable costs equal fixed costs when nothing is produced

The cost of producing an additional unit of a good is not the same as the average cost of the good

Average variable cost is equal to total variable cost divided by quantity of output

The average total cost curve is unaffected by diminishing marginal product

The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves

If the marginal cost curve is rising, so is the average total cost curve.

The marginal cost curve intersects the average total cost curve at the minimum point of the average total cost curve

Assume Jack received all A's in his classes next semester. If he gets all C's this semester, his GPA may or may not fall

The sum of average fixed cost and average variable cost

Average fixed cost always decreases as output expands

The quantity of output that minimizes average total cost

A second or third worker may have a higher marginal product than the first worker in certain circumstances

Average total cost and marginal cost are merely ways to express information that is already contained in a firm's total cost

Average total cost reveals how much total cost will change as the firm alters its level of production

The shape of the marginal cost curve tells a producer something about the marginal product of her workers

When average total cost rises if a producer either increases/decreases production, then the firm is said to be operating at efficient scale

Some costs are fixed in the short run, but all are variable in the long run

Lowest points of the short-run average-total-cost curves (more flexibility in the long run)

In the long run, a factory is usually considered a fixed input

Fixed costs are those costs that remain fixed no matter how long the time horizon is

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curves

The property whereby long-run average total cost falls as the quantity of output increases

Major reason of economies of scale: (less workers needed to operate more machines and fixed costs much lower)

The property whereby long-run average total cost rises as the quantity of output increases

Major reason for diseconomies of scale: (too large and hard to manage, coordination and quality control)

The property whereby long-run average total cost stays the same as the quantity of output changes

Diseconomies of scale often arise because higher production levels allow specialization among workers

The fact that many decisions are fixed in the short run but variable in the long run has little impact on the firms cost curves

In some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories

The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are