Econ Ch. 11

supply chain

manufacturer to retail store

supply curves are upward slopping because..

marginal cost increases as firms increase quantity of good supplied

economists distinguish themselves from accountants by taking into consideration..

opportunity costs

production function

relationship between the inputs employed by a firm and the maximum output it can produce with those inputs -represents the firms technology

MC is above ATC, ATC...

rises

long run avg cost curve

shows the lowest cost at which a firm is able to produce a given quantity of output in long run when no inputs are fixed -[an envelop of short run curves]

marginal product of labor

the additional output a firm produces as a result of hiring one more worker

marginal cost

the change in a firms total cost from producing one more unit of a good or service - MC = change in TC / change in Q

opportunity cost

the highest-valued alternative that must be given up to engage in an activity -implicit costs

minimum efficient scale

the level of output at which all economies of scale are exhausted

law of diminishing returns

the principle that at some point, adding more of a variable input (like labor) to same amt of fixed input (like capital) will cause the marginal product of the variable input to decline -[when reached, with each new worker production increases by smaller amount than the hiring of the previous worker]

constant returns to scale

the situation in which firms long-run avg cost remain unchanged as it increase output [as they increase output they increase input (size of factories/# of workers) proportionally]

diseconomies of scale

the situation when firms long-run avg costs rise as the firm increases output (getting bigger doesnt always mean getting better)

average product of labor

total output produced by a firm divided by the quantity of workers [avg of marginal products of labor]

in the long run all cost are..

variable TC = VC ATC = AVC

diseconomies of scale usually occur in...

very large corporations that produce many different products and have trouble marriaging them efficiently

whenever the marginal product of labor is greater than the avg product of labor, the avg product of labor must be...

increasing (and vice versa)

marginal and avg cost curves are a U shape because

-MC of output falls and then rises -MPL rises and then falls

positive technological change

-albe to produce more output using the same inputs, or same output using fewer inputs

short run

-at least one of the firms inputs is fixed [capital] (factory/store/office/where, then number of workers is variable)

economies of scale may happen because

-firms tech may make it possible to increase production with a smaller proportional increase in at least one input -both workers and managers become specialized, enabling them to become more productive as output expands -large firms may be able t purchase inputs at lower costs than smaller competitors *occur when LRAC are decreasing

just in time inventory systems

-gets shipments from suppliers as close as possible to the time the goods will be needed

inventories

-goods that have been produced but not yet sold -want to "turn over" as quickly as possible so items dont sit on shelves -too few result in stockouts

technology

-processes a firm uses to turn inputs into outputs of goods and services -depends on skills of its managers, training of its workers and the speed and efficiency of its machinery equipment

inputs

-things we need (all/any workers, machines, natural resources) to produce outputs of goods and services

technology is described by how many...

inputs it takes to produce a particular amount of output

Which of the following is not a source of technological advancement for a producer? a) better trained workers b) more efficient physical capital c) higher skill level of managers d) outsourcing some aspect of production

D: outsourcing some aspects of production

the minimum ATC will be where it is crossed by the ___ curve

MC

Q is the sum or all the

MPL

max APL (average product labor) is where APL=

MPL (marginal product labor)

graph of TC VC FC

TC is above VC, distance in between the two curves is the FC

ATC =

TC/Q = FC/Q + VC/Q = AFC + AVC =ATC - AFC which means that the AVC will be less than the ATC for all levels of output

MC=ATC, when ATC is at...

its lowest pt

economic costs

accounting (explicit) + implicit costs

when LRAC are constant we have..

constant returns to sale

total cost

cost of all the inputs a firm uses in production -(in short run: fixed plus variable)

variable costs

costs that change as output changes

fixed costs

costs that remain constant as output changes

if MP<AP then AP is

decreasing

when MPL is increasing the output of the firm is growing faster than the amount of workers because the firm pays all of its workers the same amt, labor cost are increasing slower than output is, so MC is ...

decreasing

economic depreciation

difference btw what someone paid for their capital at the beginning of the year and what they would have received at the end of the year (implicit cost)

economies of scale graph goes in this oder:

economies of scale -> minimum cost/min eff. scale -> constant -> diseconomies of scale

accounting costs =

explicit costs

MC is below ATC, ATC...

falls

long run

firm able to vary all its inputs and can adopt new technology and increase or decrease size of its physical plant

implicit costs

firm experiences a nonmonetary opportunity costs

explicit costs

firm spends money

economies of scale

firms long run avg costs fall as it increases the quantity of output it produces

economies of scale do ot continue forever. long run ave cost curve in most industries has a ....

flat segment that often stretches over a substantial range of output

when MPL is decreasing, as you add more labor, output does not increase as rapidly so labor cost increase faster than output and MC...

increases

if MP>AP then AP is

increasing