3.1 Video 1
What are the 2 types of input?
Variable Inputs and Fixed Inputs
When Marginal Product is increasing, Total Product is ________ at an increasing rate
Increasing
What is Fixed Variable Cost?
A cost that must be paid even when a firm's output is zero; a cost that is the same at all output values
What is long run?
-All inputs can be altered
-No inputs are fixed
-Plant Capacity can be altered
-All costs are variable
What are explicit costs?
"Out of Pocket Expenses," money spent of materials, utilities, labor, rent, capital, etc.
What is Plant Capacity
A firm's maximum potential level of production
When Marginal Product is _________ but _________, Total Product is increasing at a decreasing rate
Positive but Decreasing
What is the Marginal Cost Formula?
MC= Δ Total Cost / Δ Quantity
What is Increasing Returns to Scale?
When output is increasing at a faster rate than all inputs
What are examples of Implicit Costs?
A teacher opening up a restaurant: the implicit cost is the income that they are giving up by becoming a restaurant owner.
What is the definition of a production function?
The way a firm combines inputs to produce an output
When Marginal Product is at zero, Total Product is at __________
Maximum
Marginal Cost depends on Marginal Product:
MC _______ initially (specialization)
MC eventually _________ (diminishing returns)
Decreases
Rises
What is Decreasing Returns to Scale?
When output is increasing at a slower rate than all inputs
How do you find accounting profit?
Accounting Profit= Total Revenue - Explicit and implicit costs
What is the formula for Marginal Product?
Marginal Product= Change in Total Product/ Change in Labor
When Marginal Product is below Average Product, Average Product is _______
Falling
What is the formula for Average Fixed Costs?
AFC= Fixed Cost/Quantity
What is Constant Returns to Scale?
When output is increasing at the same rate as all inputs.
What are examples of explicit costs?
A car company faces explicit costs such as metal, copper, rubber, computer software and autoworkers
What types of input correlate to the short and long run?
Variable Inputs can be changed in the short run
Fixed Inputs can be changed in the long run
When Marginal Product is above Average Product, Average Product is _______
Rising
What is the Average Variable Cost Formula?
AVC= VC/Q
What helps to determine the number of firms in a market?
Minimum Efficient Scale
If Total Revenue= $120,000 and Explicit Costs are $90,000, what is the accounting profit?
AP= TR- EC
$120,000-$90,000= $30,000 accounting profit