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What makes up a firms cost of production?
Implicit costs and explicit costs.
** whenever we are talking about costs we are talking about opportunity costs.
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what are accounting profits?
total revenues minus the explicit costs.
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what are economic profits
total revenues minus explicit and implicit costs.
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what are sunk costs?
costs that have allready been incurred and cannot be recovered
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what is the short run
it is a period in time in time too short for some inputs to be varied.
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what is the long run?
a period in time in which a firm can adjust all inputs
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what is production function?
the relationship between quantity of inputs and the quantity of outputs.
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total out put Q
is the total amount of units ouyput produced by a firm
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In the short run...total output will start off_______ and then as more input come out then it will slowly ________
Low level.....increase.
** it will continue to increase until the variable input becomes so large in realation to quantity from of other.
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Marginal product first _______ then it _______
Rises, falls.
**it rises as as the result of more effective use of fixed imputs.
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what are fixed costs?
are costs that don't varies with the level of output
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what are variable cost
are costs that are not fixed. they vary with the level of output
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what is average fixed cost
total fixed cost divided by level output produced
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what is average variable cost?
total variable cost divided by the output produced.
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what is marginal cost
the cahnge in total cost associated with the change in one or more unit in an output
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TFC curve is always a ________ line because the fixed costs are the same on all outputs.
horizontal
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the average fixed cost line constantly declines but ,,,,,
never hits zero
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what does the marginal cost line bump into at its lowest point?
ATC and AVC
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At high output levels high marginal costs __________ the ATC and AVC. and at low output, the Marginal cost curve _______ the ATC and AVC curves
raises, lowers
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when marginal product of labor is rising marginal cost are______
- falling
- **each additional worker adds more to the total product than the previous worker
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