Studied by 5 peopleProduction Function
Shows the relationship between the quantity of labor a firm hires and the quantity of output that number of workers produces.
Marginal Product
The additional output produced by one more unit of labor.
Marginal Cost of Labor
The wage paid to workers divided by the marginal product of labor.
Fixed Costs
Costs associated with production that don't change with output.
Variable Costs
Costs that change with the quantity of output.
Total Costs
The sum of fixed costs and variable costs.
Marginal Cost
The change in total cost divided by the change in quantity of output.
Average Variable Cost
Variable cost divided by the quantity of output.
Average Total Cost
Total cost divided by the quantity of output.
Productive Efficiency
Quantity at the minimum point of the average total cost curve with the lowest average cost of production.
Diseconomies of Scale
Average costs increase due to inefficient bureaucracy as production expands.
Profit Maximization
Firms seek to maximize profit, considering accounting profit and economic profit.
Marginal Revenue
Revenue from selling an additional unit of a good.
Perfect Competition
Market structure with many firms selling identical products, low barriers to entry, and zero economic profit in the long run.
Long Run Equilibrium
Firms earn zero economic profit, and price equals the minimum of the average total cost curve.
Efficiency in Perfect Competition
Firms are allocatively and productively efficient in the long run.
Increasing Cost Industries
More firms in the market shift each individual firm's cost curves up.
Long Run Supply Curve
Horizontal curve where price equals the minimum average total cost in perfect competition.
Note
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