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Chapter 11

# 02.19.14 Chapter 11.docx

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School
Department
Economics
Course
ECON 1116
Professor
Osborne Jackson
Semester
Spring

Description
Chapter 11 - The Production Function: is the relationship between the quantity of inputs a firm uses and the quantity of output it produces. - Fixed input: an input whose quantity is fixed for a period of time and cannot be varied. - Variable input: an input whose quantity the firm can vary at any time. - Long run: time period in which all inputs can be varied - Short run: time period in which at least one input is fixed. - Total product curve: shows how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input. - Marginal product: of an input is the additional quantity of output that is produced by using one or more unit of that input. Chapter 11 - Diminishing returns to an input: when an increase in the quantity of that input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input. Chapter 11 The position of the total product curve depends on the quantities of other inputs. - Fixed cost: a cost that does not depend on the quantity of output produced. It is the cost of the fixed input. - Variable cost: the cost that depends on the quantity of output produced. Is the cost of the variable input. - Total cost: of the producing a given quantity of ouput is the sum of the fixed cost and the variable cost of producing that quantity of output. o Total cost= Fixed Cost + Variable Cost Chapter 11 - Total cost curve: shows how the total cost depends on the quantity of output. Chapter 11 - Average total cost: referred to as average cost, is total cost divided by quantity of output produced Chapter 11 - Ushaped average total cost curve: falls at low levels of output, then rises at higher levels. Increasing output has 2 effects on average total cost 1. Spreading effect: larger the output the greater the quantity of output over which fixed cost is spread, l
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