Ch 6 - Costs of Production

Diminishing marginal returns

the additional factors of production lead to a decrease in output or productivity.

Average Fixed costs AFC

is the fixed costs that does not change with the change in the number of goods and services produced by a company.

Constant Returns to Scale

occurs when the long run average total cost curve remains constant as the production either increases or decreases.

Total Fixed Costs TFC

are those that do not vary with changes in output.

Economies of Scale

are when the long run average total cost curve decreases as the output increases.

Average total costs ATC

Is the total costs needed to produce goods.

lump sum tax

will not change or affect the amount produced, neither will it affect their price.

Average Variable costs AVC

Is the costs of all variable expenses which are involved in producing a product.

Economic profit

is that which is concerned with economic gain, which equals revenue subtracted from explicit and implicit costs.

Lump Sum Taxes

is a fixed and unchanging tax regardless of the amount a firm produces.

constant returns

If a firm doubles all inputs used in production, and output doubles, it is experiencing ________ to scale.

Long run

when all resources used by a firm in production are variable and supply can adjust to changes in demand

Short run

is where at least one production method is fixed and supply is not able to fully get accustomed to changes in demand

Average Product (AP)

total product divided by the number of labour inputs

Marginal Product (MP)

change in production with an additional worker

Increasing Marginal Returns

is the total product increasing at an increasing rate

Diminishing marginal returns

the additional factors of production lead to a decrease in output or productivity

Negative marginal returns

occurs when the total product is failing, and marginal revenue turns negative as the additional factors of production reduce productivity instead of add to it

Total Fixed Costs (TFC)

are those that do not vary with changes in output

Total Variable costs (TVC)

these costs vary as output changes

Total Costs (TC)

these costs are the sun of both variable and fixed costs

Average Fixed costs (AFC)

is the fixed costs that does not change with the change in the number of goods and services produced by a company

Average Variable costs (AVC)

Is the costs of all variable expenses which are involved in producing a product

Average total costs (ATC)

Is the total costs needed to produce goods

Marginal costs (MC)

is the change in total costs from the production of one more unit of output

Lump-Sum Taxes

is a fixed and unchanging tax regardless of the amount a firm produces

Economies of Scale

are when the long run average total cost curve decreases as the output increases

Diseconomies of scale

when the LR average total cost curve increases as a firms output increases

Returns of Scale

This is the returns of changes in output after all inputs have been changed by the same factor