Understanding Production Costs: Short-Run and Long-Run

Vocabulary flashcards focusing on key concepts related to production costs in economics.

Short-run

A period in which at least one resource is fixed.

Long-run

A period in which all resources are variable and can be changed.

Economies of scale

The reduction in per-unit cost as production increases.

Diseconomies of scale

The increase in per-unit cost as a firm grows beyond an optimal size.

Constant returns to scale

Production where doubling the input results in a doubling of output.

Average Total Cost (ATC)

The total cost divided by the quantity of goods produced, reflecting the cost per unit.

Marginal Cost (MC)

The increase in total cost that arises from producing one additional unit of output.

Long Run Average Total Cost (LRATC)

The lowest possible average cost of production when all inputs can be varied.

Fixed resources

Resources that cannot be changed in the short-run.

Mass production techniques

Methods that allow firms to produce large quantities of goods efficiently.