Key Terms

Question

Production function
Fixed input
Variable input
Long run
Short run
Total product curve
Marginal product
Diminishing returns to an input
Fixed cost
Variable cost
Total cost
Total cost curve
Average total cost
Average cost
U-shaped average total cost curve
Average fixed cost
Average variable cost
Minimum-cost output
Long-run average total cost curve
Increasing returns to scale
Decreasing returns to scale
Constant returns to scale
the sum of the fixed cost and the variable cost of producing a quantity of output.
a distinctive graphical representation of the relationship between output and average total cost; the average total cost curve at first falls when output is low and then rises as output increases.
a cost that depends on the quantity of output produced; the cost of the variable input.
the time period in which at least one input is fixed.
total cost divided by quantity of output produced. Also referred to as average cost.
an input whose quantity is fixed for a period of time and cannot be varied (for example, land).
cost that does not depend on the quantity of output produced. It is the cost of the fixed input.
the variable cost per unit of output.
total cost divided by quantity of output produced. Also referred to as average total cost.
long-run average total cost declines as output increases (also referred to as economies of scale).
a graphical representation of the total cost, showing how total cost depends on the quantity of output.
a graphical representation showing the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output.
long-run average total cost increases as output increases (also known as diseconomies of scale).
long-run average total cost is constant as output increases.
a graphical representation of the production function, showing how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input.
the fixed cost per unit of output.
the time period in which all inputs can be varied.
the additional quantity of output produced by using one more unit of that input.
the effect observed when an increase in the quantity of an input, while holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input.
an input whose quantity the firm can vary at any time (for example, labor).
the relationship between the quantity of inputs a firm uses and the quantity of output it produces.
the quantity of output at which average total cost is lowest—the bottom of the U-shaped average total cost curve.

Production function

Fixed input

Variable input

Long run

Short run

Total product curve

Marginal product

Diminishing returns to an input

Fixed cost

Variable cost

Total cost

Total cost curve

Average total cost

Average cost

U-shaped average total cost curve

Average fixed cost

Average variable cost

Minimum-cost output

Long-run average total cost curve

Increasing returns to scale

Decreasing returns to scale

Constant returns to scale