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  1. The change in total cost divided by the change in output.

    MC= ATC/AQ (the A represents delta)

    see example on page 197

    This entry is listed between the output levels ) and 30 in the table, and graphed between output levels in the figure.
  2. Economies of scale (decreasing LRATC) at relatively low levels of output, constant returns to scale (constant LRATC) at some intermediate levels of output, and diseconomies of scale (increasing LRATC) at relatively high levels of output. This is why LRATC curves are typically U-shaped.
  3. Good point, wow.
  4. increasing and then diminishing marginal returns to labor.
  5. THe cost of producing each quantity of output when all inputs are variable and the least-cost input mix is chosen.
  6. Plant
  7. the short-run total cost (LRTC is less than or equal to TC). We can also state this relationship in terms of average costs, that is, we can divide both sides of the inequality by Q and obtain LRTC/Q is less than or equal to TC/Q. Using the definitions, this translates to LRATC is less than or equal to ATC.
  8. Average and marginal test scores.
  9. Yep.
  10. The cost of all variable inputs used in producing a particular level of output.
  11. All inputs and all costs are variable.
  12. costs of fixed inputs, which remain constant as output changes
  13. See page 196
  14. TC= TFC + TVC
    At 90 units of output, the TFC = $150 and TVC = $240, so TC = $150+ $240= $390
  15. AFC= TFC/ Q
    (See page 195 for math and graph)
  16. Inputs that cannot be increased in tiny increments, but rather must be increased in large jumps.
  17. In the short run, it is stuck with its current plant.
  18. The change in total cost from producing one more unit of output.
  19. At higher levels of output, rising AVC overcomes falling AFC, and the ATC curve slopes upward.
  20. Variable costs
  21. Increasing marginal returns to labor
  22. Wow. Insightful.
  23. Good point. Wow.
  24. The lowest output level at which the firm's LRATC curve hits bottom.
  25. for the total cost equation and example.
  26. THe change in total product divided by the change in the number of workers employed. See page 189 for equation.
  27. It is u-shaped
  28. Downward.
  29. The costs of all inputs-- fixed and variable-- used to produce a given output level in the short run.
  30. both are obtained by dividing total cost by the level of output.
  31. Gains from specialization and spreading costs of lumpy inputs
  32. Yep.
  33. The marginal cost (MC)
  34. The total revenue minus total cost
  35. Total cost divided by the quantity of output produced. The total cost per unit of output:

    ATC= TC/Q

    See page 197 for example
  36. Since MPL ordinarily rises and then falls, MC will do the opposite: It will fall then rise. Thus, the MC curve is U-shaped.
  37. At low levels of employment and output, there are increasing marginal returns to labor: MPL= changeQ/ ChangeL is rising. That is, each worker hired adds more to production than the worker before. But this means that fewer additional workers are needed to proceed an additional unit of output, so the cost of an additional unit of output (MC) must be falling.
  38. Economies of scale can pal a role in explaining mergers and acquisitions, especially when there are too many firms for each to operate at tis minimum efficient scale.
  39. Therefore, when MC goes from below the average to above the average-- that is, where the MC curve crosses the average curve-- the average must be at its very minimum (where it changes from a downward slope to an upward slope)
  40. summarizes the chapter:)
  41. Average fixed cost
  42. constant returns to scale
  43. compete with each other
  44. Short run
  45. As we keep adding workers, additional gains from specialization will be harder to achieve. I f we keep increasing the quantity of any input, while holding the others fixed, diminishing marginal returns will eventually set in.
  46. Total variable cost divided by the quantity of output produced. AVC is the cost of the variable inputs per unit of output:

    AVC= TVC/Q

    see page 196 for example
  47. The marginal product of labor decreases as more labor is hired. Output still rises when another worker is added, so marginal product is positive. But the rise in output is smaller and smaller with each successive worker.
  48. the short-run average total cost (LRATC is less than or equal to ATC)
  49. It states that a business firm will produce any given output level using the least-cost combination of inputs available to it.
  50. Total fixed cost
  51. Variable input
  52. reflecting the relationship between average and marginal cost. THe marginal cost curve must cross each of the average curves at their minimums.
  53. Both implicit and explicit costs.
  54. Fixed input
  55. Total product
  56. This explains any the ATC curve is U-shaped.
  57. Economies of scale
  58. Long-run average total cost increases as output increases.
  59. It can move from one ATC curve to another by varying the size of its plant. As it does so, it will also be moving along its LRATC curve.
  60. Tells us the rise in output produced when one more worker is hired. For example, when employment rises from 2 to 3 workers, total product rises from 90 to 130, so the marginal product of labor for that change in employment is calculated as (130-90)/1= 40 units of output.
  61. THat as we continue to add more of any one input ( holding the other inputs constant), its marginal product will eventually decline. It is a physical law, not an economic one. It is based on the nature of production.
  62. Intermediate
  63. Long-run average total cost is unchanged as output increases.
  64. Average fixed costs (AFC), Because TFC remains constant, so a rise in Q myst cause the ratio TFC/Q to fall.
  65. The long run
  66. Yep.
  67. each portion representing a different pleant size. The LRATC curve slopes downward when there are economies of scale, which continues until the firm reaches its minimum efficient scale.
  68. Yep
  69. U-shape
  70. Increasing marginal returns to labor
  71. Business firms
  72. MC must be rising.
  73. When long-run total cost rises more than in proportion to output, there are diseconomies of scale, and the LRATC curve slopes downward.
  74. the average curve slopes downward.
  75. The more output produced, the lower the cost per unit. The long-run average total cost decreases as output increases.
  76. The cost per input of producing each quantity of output in the long run, when all inputs are variable.

  77. The sum of all fixed and variable costs. TC= TFC +TVC
  78. Thus, economies of scale are more likely to occur at lower levels of output.
  79. falls
  80. One that already has been paid, or must ne paid, regardless of any future action being considered. Sunk costs should not be considered when making decisions. They are not included in the opportunity costs; they are already spent.
  81. Rise in the marginal product of labor.
  82. A U-shape reflecting the underlying marginal product of labor.
  83. The methods available for combining inputs to produce a good or service?
  84. ATC