The Cost of Production
Explicit Cost
-A payment made for the use of a resource.
Long Run
-A period of time long enough for all inputs to be varied.
Production Function
-A technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs.
Fixed Cost
-Cost of production that don't change when the rate of output is change. -The cost of basic plant and equipment.
Variable Cost
-Costs of production that change when then rate of output is changed. -Labor and material costs.
Unit Labor Cost
-Hourly wage rate divided by output per labor hour.
Constant Returns to Scale
-Increases in plant size do not affect minimum average cost.
Marginal Product
-MMP -The change in total output associated with one additional unit of input.
Productivity
-Output per unit of input, for example, output per labor-hour.
Economies of Scale
-Reductions in minimum average costs that come about through increases in size of plant and equipment.
Factors of Production
-Resource inputs used to produce good and services, such as land, labor, capital, and entrepreneurship.
Profit
-The difference between total revenue and total cost.
Economic Profit
-The difference between total revenues and total economic costs.
Marginal Cost
-The increase in total cost associated with a one unit increase in production.
Law of Diminishing Returns
-The marginal physical product of a variable input declines as more of it is employed with given quantity of other inputs.
Total Cost
-The market value of all resources used to produce a good or service.
Normal Profit
-The opportunity cost of capital; zero economic profit.
Short Run
-The period in which the quantity of some inputs can't be changed.
(1) Complete this sentence: "The dilemma of machine operators without sewing machines illustrates a general principle of production . . ." [13th edition, page 138; 12th edition, page 125; 11th edition: page 119]
-The productivity of any factor of production depends on the amount of other resources available to it.
Economic Cost
-The value of all reassures used to produce a good or service.
Implicit Cost
-The value of resources used, even when no payment is made.
Average Total Cost
-Total cost divided by the quantity produced in a given time period.
Average Fixed Cost
-Total fixed cost divided by the quantity produced in a given time period.
Average Variable Cost
-Total variable cost divided by the quantity produced in a given time period.