cost curves

law of diminishing returns - increasing one input in a production process while other inputs remain constant; as a variable factor (e.g. labour) is applied to a fixed factor (e.g. capital), productivity will at first increase, but then decrease, thus raising marginal cost and average variable cost

total product - the total amount of output a firm produces within a given amount of time using a specific amount of inputs

average product - the average amount of output per worker

marginal product - the extra output that results from employing one extra unit of labour

total fixed costs - costs that do not depend on the level out output in the short run

average fixed costs - the fixed costs of production divided v the quantity of output produced

total variable costs - the quantity of output multiplied by the variable cost per unit of output

average variable costs - the variable cost per unit given a certain level of production

marginal costs - the change in total production cost that occurs when one more unit is produced

short run - a period of time when at least one input in the production process is fixed and cannot be changed

long run - a theoretical period of time when all factors of production and costs are variable, and all prices and quantities are in equilibrium

fixed factor - elements in the production process that cannot be altered in the short run (e.g. machinery, buildings, vehicles)

variable factor - a factor of production that changes in relation to the level of output (mainly labour and materials)