ECON-1006EL Midterm: Long Answer
20 Jun 2018
School
Department
Course
Professor
Long Run — Is the time period in which all inputs is fixed.
Fixed Inputs — Is an input whose quantity is fixed for a period of time and cannot be varied.
Production Function — The relationship between the quantity of inputs a firm uses and the
quantity of output it produces, for a given state of the production technology.
Marginal Product — In reference of an input is the additional quantity of output that is produced
by using one or more unit of that input, holding other inputs and the production technology fixed.
Marginal product of labour = Change in quantity of output produced by one additional
unit of labour = Change in quantity of output/Change in quantity of labour. MPL = Dq/DL
Common Marginal and Average Product of Labour
-When marginal product is greater than average product, average product rises.
-When marginal product is less than average product, average product falls/
-When marginal product is the same as average product, average product remains
unchanged. The average product is maximized when the marginal product is equal to the
average product.
Marginal Cost = Change in total cost generated by one additional unit of output = Change in
total cost/ Change in quantity of output. MC = D TC/ Dq.
Average Total Cost — Often referred to simply as average cost, is total cost divided by quantity
of output produced.
U-shaped Average Total Cost — this curve falls at low levels of output, then rises at higher
levels; When average total cost is minimized, the point of minimum-cost output.
Long-Run average total cost curve— shows the relationship between output and average total
cost when fixed cost has been chosen to minimize average total cost for each level of output.
Average Fixed Cost — Is the fixed cost per unit of output. AFC = Fixed cost/Quantity of
output = FC/q
Fixed Cost — is a cost that does not depend on the quantity of output produced. It is the cost of
the fixed input.
Fixed Cost of Production — Also known as indirect costs, in the end all costs can be changed
although some fixed costs may change with the level of production while many don’t.
Variable cost — Is a cost that depends on the quantity of output produced. It is the cost of the
least amount of the variable input needed to make the quantity of output.
Total Cost — of producing a given quantity of output is the sum of the fixed cost and variable
cost of producing that quantity of output.
Total Cost Curve — shows how total cost depends on the quantity of output.
Total cost = Fixed cost + variable cost or TC = FC + VC
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Long run is the time period in which all inputs is xed. Fixed inputs is an input whose quantity is xed for a period of time and cannot be varied. Production function the relationship between the quantity of inputs a rm uses and the quantity of output it produces, for a given state of the production technology. Marginal product in reference of an input is the additional quantity of output that is produced by using one or more unit of that input, holding other inputs and the production technology xed. Marginal product of labour = change in quantity of output produced by one additional unit of labour = change in quantity of output/change in quantity of labour. When marginal product is greater than average product, average product rises. When marginal product is less than average product, average product falls/ When marginal product is the same as average product, average product remains unchanged.
