Technology, Production, and Costs

A set of flashcards covering key vocabulary terms and definitions related to technology, production, costs, and market structures.

Technology

The processes used by a firm to turn inputs into outputs of goods and services.

Long Run vs. Short Run

Short run has at least one fixed input, while in the long run all inputs can be varied.

Fixed Costs

Costs that do not depend on the quantity of output produced.

Variable Costs

Costs that do depend on the quantity of output produced.

Total Cost (TC)

The sum of total fixed costs and total variable costs at any level of output.

Marginal Product of Labor (MPL)

The additional output produced by using one more unit of labor.

Average Fixed Costs (AFC)

Total fixed costs per unit of output produced.

Average Variable Costs (AVC)

Total variable costs per unit of output produced.

Average Total Cost (ATC)

Total cost per unit of output produced.

Economies of Scale

Long-run average total cost decreases as output increases.

Perfect Competition

A market structure characterized by many buyers and sellers, with no market power.

Shut-down Price

The price at or below the minimum average variable cost at which a firm will stop production.

Long-Run Market Equilibrium

Occurs when quantity supplied equals quantity demanded after firms have entered or exited the market.

Monopolistic Competition

A market structure with many competitors offering similar but not identical products.

Network Externalities

A situation where the value of a product increases with the number of users.

Antitrust Policy

Government policies intended to promote competition and prevent monopoly practices.

Natural Monopoly

A market where a single firm can produce more cheaply than multiple firms.

Price Regulation

Government-imposed limits on the prices that a monopolist can charge.

Excess Capacity

The condition when firms produce less output than they could to minimize average total costs.