# microeconomics 2

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1. short run*
the time period during which at least one input, such as plant size, cannot be changed; a period of time too brief to alter plant capacity, yet long enough to change the level at which the fixed plant is used
2. plant size
the physical size of the factories that a firm owns and operates to produce its output. Plant size can be defined by square footage, maximum physical capacity, and other physical measures
3. long run*
the time period during which all factors of production can be varied; a period of time extensive enough for firms to change all resources employed including plant capacity
4. production
any activity that results in the conversion of resources into products that can be used in consumption
5. production function
the relationship between inputs and maximum physical output. A production function is a technological, not an economic, relationship
6. average physical product*
equation= total product (TP) divided by L; output per worker
7. marginal physical product*
the physical output that is due to the addition of one more unit of a variable factor of production; the change in total product occurring when a variable input is increased and all other inputs are held constant; also called marginal product; the change in total output associated with each additional input of labor. equation= change in TP / change in L
8. law of diminishing marginal product*
the observation that after some point, successive equal-sized increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output; as successive units of a variable resource (labor) are added to a fixed resource (capital or land), beyond some point the extra or marginal product attributable to each additional unit of the variable resource will decline
9. total costs*
the sum of total fixed costs and total variable costs
10. fixed costs*
costs that DO NOT vary with changes in output. fixed costs typically include such things as rent on a building. These costs are fixed for a certain period of time (in the long run, though, they are variable)
11. varibale costs*
costs that DO vary with the rate of production or level of output. They include wages paid to workers and purchases of materials
12. average fixed costs
total fixed costs divided by the number of units produced
13. average variable costs
total variable costs divided by the number of units produced
14. total product*
output resulting from combining each level of labor with a fixed amount of capital
15. average total costs
total costs divided by the number of units produced; sometimes called average per-unit total costs
16. marginal costs*
the change in total costs due to a one-unit change in production rate; the extra or additional cost of producing one more unit of output; equation= change in total cost / change in quantity
17. planning horizon
the long run, during which all inputs are variable
18. long-run average cost curve*
the locus of points representing the minimum unit cost of producing any given rate of output, given current technology and resource prices; shows the least per unit cost at which any output can be produced after the firm has had time to make all appropriate adjustments in its plant size
19. planning curve
the long-run average cost curve
20. economies of scale*
decreases in long-run average costs resulting from increases in output; as a plant size increases, a number of factories will for a short time lead to lower average costs of production
21. constant returns to scale
no change in long-run average costs when output increases
22. diseconomies of scale*
increases in long-run average costs that occur as output increases; the expansion of a firm leads to higher per unit costs
23. minimum efficient scale (MES)*
the lowest rate of output per unit time at which long-run average costs for a particular firm are at a minimum
24. perfect competition
a market structure in which the decisions of individual buyers and sellers have no effect on market price
25. perfectly competitive firm
a firm that is such a small part of the total industry that it cannot affect the price of the product it sells
26. price taker
a perfectly competitive firm that must take the price of its product as a given because the firm cannot influence its price
27. total revenues
the price per unit times the total quantity sold
28. profit-maximizing rate of production
the rate of production that maximizes total profits, or the difference between total revenues and total costs; also, the rate of production at which the marginal revenue equals marginal cost
29. marginal revenue
the change in total revenues resulting from a change in output (and sale) of one unit of the product in question
30. short-run break-even price
the price at which a firm's total revenues equal its total costs. at the break-even price, the firm is just making a normal rate of return on its capital investment. (it is covering its explicit and implicit costs)
31. short-run shutdown price
the price that covers average variable costs. it occurs just below the intersection of the marginal cost curve and the average variable cost curve
32. industry supply curve
the locus of points showing the minimum prices at which given quantities will be forthcoming; also called the market supply curve
33. signals
compact ways of conveying to economic decision makers information needed to make decisions. an effective signal not only conveys information but also provides the incentive to react appropriately. economic profits and economic losses are such signals
 Author: jennpick ID: 23963 Card Set: microeconomics 2 Updated: 2010-06-18 13:17:43 Tags: micro econ normandale Folders: Description: normandale microeconomics Show Answers: