Section 10 Module 54 and 55 Vocabulary

production function

the relationship between the quantity of inputs a firm uses and the quantity of output it produces.

fixed input

an input whose quantity is fixed for a period of time and cannot be varied.

variable input

an input whose quantity the firm can vary at any time.

long run

the time period in which all inputs can be varied.

short run

the time period in which at least one input is fixed.

total product curve

shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input.

marginal product

the additional quantity of output produced by using one more unit of an input.

diminishing returns to an input

when an increase in the quantity of that input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input.

fixed cost

a cost that does not depend on the quantity of output produced; the cost of the fixed input.

variable cost

a cost that depends on the quantity of output produced. It is the cost of the variable input.

total cost

the sum of the fixed cost and the variable cost of producing a given quantity of output.

total cost curve

shows how total cost depends on the quantity of output.

average total cost(average cost)

total cost divided by quantity of output produced.

u-shaped average total cost curve

falls at low levels of output and then rises at higher levels

average fixed cost

the fixed cost per unit of output.

average variable cost

the variable cost per unit of output.

minimum-cost output

the quantity of output at which average total cost is lowest—it corresponds to the bottom of the U-shaped average total cost curve.

average product

the total product divided by the quantity of an input.