ECON-UA 2 Chapter Notes - Chapter 7: Variable Cost, Opportunity Cost, Marginal Product

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11 Apr 2016

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Organizations owned and operated by private individuals that specialize in production. Production is the process of combining inputs to make goods and services. A firm"s technology refers to the methods it can use to turn inputs into outputs (produced goods or services). A time period long enough for a firm to change the quantity of all of its inputs. Inputs that can be adjusted up or down as desired. This is the case with all inputs in the long run, but not the short run. Inputs that, over the time period we"re considering, cannot be adjusted, even if the firm"s level of output changes. This is the case of all inputs in the short run, but not the long run. A time period during which at least one of the firm"s inputs is fixed. The maximum quantity of output that can be produced from a given combination of inputs. How much output increases with each one-unit rise in employment.

Related Questions

A basic distinction between the long run and the short run is that:

A) If a firm produces no output in the long-run, it still incurs a loss.

B) The opportunity costs of production are lower in the short-run than in the long-run.

C) In the long-run some inputs are fixed, while in the short-run all inputs are variable.

D) In the short-run, complete adjustment of all inputs is impossible, while in the long-run all inputs can be adjusted.

bronzellama426

1. Theoretically, in a long-run cost function:

a. all inputs are fixed

b. all inputs are considered variable

c. some inputs are always fixed

d. capital and labor are always combined in fixed proportions

2. The short-run cost function is:

a. where all inputs to the production process are variable

b. relevant to decisions in which one or more inputs to the production process are fixed

c. not relevant to optimal pricing and production output decisions

d. crucial in making optimal investment decisions in new production facilities

3. Break-even analysis usually assumes all of the following except:

a. in the short run, there is no distinction between variable and fixed costs.

b. revenue and cost curves are straight-lines throughout the analysis.

c. there appears to be perfect competition since the price is considered to remain the same regardless of quantity

d. the straight-line cost curve implies that marginal cost is constant.

maroonllama628

constant costs

increasing returns to scale

constant returns to scale

isocost curve

decreasing returns to scale

isoquant

diseconomies of scale

long-run average cost

economies of scale

long-run marginal cost

economies of scope

marginal rate of technical substitution

expansion path

short-run expansion path

___A curve that displays all the various combinations of inputs that will produce a given amount of output.

___The rate at which one input is substituted for another along an isoquant.

___Line that shows all the possible combinations of inputs that can be purchased for a given total cost.

___A curve showing all of the cost-minimizing levels of input usage for various levels of output.

___When the usage of all inputs is increased by an equal proportionate amount, output ___increases by exactly the same proportion.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a larger proportionate amount.

___When the usage of all inputs is increased by an equal proportionate amount, output increases by a smaller proportionate amount.

___Cost per unit in the long run.

___The change in long-run total cost per unit change in output.

___When long-run average cost falls as output increases.

___When long-run average cost increases with increases in output.

___Long-run average and marginal costs are equal for all levels of output.

___The situation in which the joint cost of producing two goods is less than the sum of the separate costs of producing the two goods.

___Horizontal line showing the cost-minimizing input combinations for various output levels when capital is fixed in the short run.

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ECON-UA 2 Chapter Notes - Chapter 7: Variable Cost, Opportunity Cost, Marginal Product

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