econ test 3

economies of scale

ATC falls as Q increases

diseconomies of scale

ATC rises as Q increases

minimum efficient scale

Output level that minimizes ATC in long run

indivisible setup costs

some inputs are so expensive upfront that some amount of business is needed for feasibility

short-run vs. long-run in cost curved

• short run is constraint in regard to what production decisions it can make. some in puts are forced.

• long run is how a firm chooses from all possible production techniques and all inputs are variable

fixed costs vs. variable costs in cost curves

• fixed costs are those spent and cannot be changed in the period of time under consideration

• variable costs are costs that change as output changes

Price taker

a company that must accept the prevailing prices in the market of its products, its own transactions being unable to affect the market price