The Production Function
What are the Types of Inputs?
Variable Inputs and Fixed Inputs
What are the Types of Production Costs in the Short Run?
Fixed Costs (FC), Variable Costs (VC), and Total Cost (TC)
What is short run?
Only variable inputs can be altered, some inputs are fixed, plant capacity is fixed, there are both fixed and variable costs
What are the two types of profit?
Accounting profit and economic profit
What is the Profit Maximization rule?
MR=MC
What are the measurements of production?
Total Product (TP), Marginal Product (MP), and Average Product (AP)
How does the MC depend on the MP?
Mc decreases initially (specialized) or MC eventually rises (diminishing returns)
What is long run?
All inputs can be altered, no inputs are fixed, plant capacity can be altered, all costs are variable
What is the difference between Explicit Costs and Implicit Costs?
Explicit Costs are "Out of Pocket expenses" while Implicit Costs are "Income Foregone"
How do we calculate Marginal Revenue?
What is the formula for calculating Marginal Product?
MP = 🔺TP/🔺L
Marginal Product = Total Product Change/Labor Change
What are the measurements of production costs?
Average Fixed Costs (AFC), Average Variable Costs (AVC), and Average Total Cost (ATC)
What are the return to scales?
A car company faces costs such as metal, copper, rubber, leather, computer software, and auto workers. What kind of costs is this?
Explicit Costs
How do we calculate Marginal Costs?
MC= (change) Total Cost / (change) Quantity
How do we calculate Average Product?
Average Product = Total Product/Labor
Beyond a certain level of output, the short-run marginal cost will rise because?
At least one input is fixed and eventually diminishing returns will occur
What is true about long run?
All factors of production are variable
A Teacher opens a restaurant. What type of cost is this?
Implicit Costs
How do we know when something is no longer profitable?
When the Marginal Cost become higher than the Marginal Revenue
In microeconomics, the short run is defined as which?
A period during which some inputs in a firms production process cannot be changed.
If the marginal cost of producing the first unit of some good is $20 and the marginal cost of producing the second unit is $30, the average variable cost of producing 2 units is?
$25
F&D Manufacturing Company increases all its inputs by 50 percent each. If F&D's output increases by 100 percent then F&D is experiencing.
increasing returns to scale
What is the difference between Accounting Profit and Economic Profit?
Accounting Profit includes explicit costs only which includes typical fixed and variable costs. Economic Profit includes both explicit costs and implicit costs or ones foregone income.
How do we know when to maximize the profit?
As long as the revenue from an additional product is greater than or equal to the cost of an additional product, the firm should keep producing