AP Microeconomics Chapter 7 Key Terms
Call Kai
Learn
Practice Test
Spaced Repetition
Match
Flashcards
Knowt Play1/21
There's no tags or description
Looks like no tags are added yet.
22 Terms
chapter 7
card #1
short run
A period in which some resources are fixed and some are variable.
Long Run
Fixed and Variable Resources
chapter 7
card #2
long run
A period of time in which all resources are variable.
Short Run
Variable Resources
chapter 7
card #3
production function
The mechanism by which inputs are transformed into outputs.
Output (Quantity)
Total Product, Marginal Product
chapter 7
card #4
total product (TP)
The total output of a particular good or service produced by a firm (or a group of firms or the entire economy).
Marginal Product
Production Function
chapter 7
card #5
marginal product (MP)
The additional output produced when 1 additional unit of a resource is employed.
Formula: ∆TP/∆labor input
Total Product
Law of Diminishing Marginal Returns
chapter 7
card #6
average product (AP)
The output per unit of labor input. (Labor productivity)
Formula: TP/Units of labor
Total Product
Inputs
chapter 7
card #7
law of diminishing returns
The principle that as successive increments of a variable resource are added to a fixed resource, the marginal product of the variable resource will eventually decrease.
Marginal Product
total product
chapter 7
card #8
economic cost
The payment that must be made to obtain and retain the services of a resource.
firms
factors of production
chapter 7
card #9
explicit cost
The monetary payment made by a firm to an outsider to obtain a resource.
Implicit Costs vs Explicit Costs
Economic Cost
chapter 7
card #10
implicit cost
The monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market.
Economic Cost
Explicit Costs vs Implicit Costs
chapter 7
card #11
fixed cost (FC)
Any cost that in total does not change when the firm changes its output.
Variable Costs
Total Cost
chapter 7
card #12
variable cost (VC)
A cost that increases when the firm increases its output and vice versa.
Fixed Costs
Total Cost
chapter 7
card #13
total cost (TC)
The sum of fixed and variable costs.
Formula: TC = FC + VC
Fixed Costs
Variable Costs
chapter 7
card #14
average fixed costs (AFC)
A firm's total fixed costs divided by output.
Formula: AFC = TFC/Q
Fixed Costs
Outputs
chapter 7
card #15
average variable cost (AVC)
A firm's total variable costs divided by output.
Formula: AVC = TVC/Q
Fixed Costs
Outputs
chapter 7
card #16
average total cost (ATC)
A firms total variable cost divided by output.
Formula: AVC = TVC/Q
Average Fixed Costs
Variable Costs
chapter 7
card #17
marginal cost (MC)
A firms total costs divided by quantity of output.
Formula: ATC = TC/Q = TFC/Q + TVC/Q = AFC + AVC
Average Fixed Costs
Average Variable Costs
chapter 7
card #18
economies of scale
The situation when a firm's average total cost of producing a product decreases in the long run as the firm increases the size of its plant (and, hence, its output).
Law of Diminishing Returns
Total Cost
chapter 7
card #19
constant returns to scale
The situation in which a firm's long-run average costs remain unchanged as it increases output.
Long Run
Economies of Scale
chapter 7
card #20
diseconomes of scale
The situation in which a firm's long-run average costs rise as the firm increases output.
Long Run
Total Cost
chapter 7
card #21
minimum efficient scale (MES)
The lowest level of output at which a firm can minimize long-run average costs.
Long Run
Economies of Scale, Diseconomies of Scale, Constant Returns to Scale
chapter 7
card #22
natural monopoly
An industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than would be possible if more than one firm produced the product.
Economies of Scale
Markets (Producers-Firms)
