Mankiw- EC101- Ch 13 (Costs of Production)
average variable cost
What does the GREEN curve indicate in this graph?
Average total cost for a large company
What does the GREEN curve represent?
shutdown point, minimum average variable cost
What does the GREY point on this graph show?
Average total cost for a small company
What does the PURPLE curve represent?
marginal cost
What does the RED curve indicate in this graph?
start of diminishing marginal productivity
What does this point mark about marginal productivity?
1: MC down, MP up, 2: MC up, MP down
What happens to the MC and MP of labor in the GREEN (1) area? What happens to the MC and MP of labor in the BLUE (2) area?
decreases because average fixed cost decreases
What happens to the distance between Average Total Cost and Average Variable Cost? Why?
point of long-run competitive market, minimum average total cost
What is the BLACK point on this graph show?
average fixed cost
What is the MAGENTA curve indicate in this graph?
marginal productivity
What is the slope of the production function also known as?
long-run total cost curve, planning cost curve
What is this a graph of? (two names for this graph)
short term total cost curve, operating cost curve
What is this a graph of? (two names for this graph)
Production Function
What is this a picture of?
economies of scale
What type of economy does section (1) represent?
no economies of scale
What type of economy does section (2) represent?
diseconomies of scale
What type of economy does section (3) represent?
decreasing
When Marginal Cost is < Average Variable Cost, Average Variable Cost is ____________.
increasing
When Marginal Cost is > Average Variable Cost, Average Variable Cost is ___________.
decreases
When Marginal Productivity is < Average Productivity, Average Productivity ___________
increases
When Marginal Productivity is > Average Productivity, Average Productivity ____________
when Marginal Cost is greater than Revenue
With regard to Revenue and Marginal Cost, when is there a loss?
when Marginal Cost is less than Revenue
With regard to Revenue and Marginal Cost, when is there a profit?
average fixed cost
fixed cost/quantity
average productivity
quantity / labor
average total cost
total cost /quantity
average variable cost
variable cost/quantity
declines
As Q goes up, what happens to the average total cost?
its at its highest point
What can we say about Average Productivity at the point in Green?
average total cost
What does the BLUE curve indicate in this graph?
Fixed costs
Costs that do not vary with the quantity of output produced
Variable costs
Costs that vary with the quanity of output produced
Average total cost for a medium company
What does the BLUE curve represent?
Average fixed cost
Fixed costs divided by the quantity of output
0
In the long-run total cost curve, what does the Total Fixed Cost equal?
Implicit costs
Input costs that do not require an outlay of money by the firm.
Explicit costs
Input costs that require an outlay of money by the firm.
inputs used, outputs produced
The Production Function shows the relationship between quantity of _______ and quantity of _______.
Total revenue
The amount a firm receives for the sale of its output.
Marginal product
The increase in output that arises from an additional unit of input.
Marginal cost
The increase in total cost that arises from an extra unit of production
Total cost
The market value of the inputs a firm uses in production.
Economies of scale
The property whereby long-run average total cost falls as the quantity of output increases
Diseconomies of scale
The property whereby long-run average total cost rises as the quantity of output increases.
Constant returns to scale
The property whereby long-run average total cost stays the same as the quantity of output changes.
Diminishing marginal product
The property whereby the marginal product of an input declines as the quantity of the input increases
Efficient scale
The quantity of output that minimizes average total cost
Production function
The relationship between quantity of inputs used to make a good and the quantity of output of that good.
Average total cost
Total cost divided by the quantity of output
Economic Profit
Total revenue minus total cost, including both explicit and implicit costs.
Profit
Total revenue minus total cost.
Accounting Profit
Total revenue minus total explicit cost
Average variable cost
Variable costs divided by the quantity of output
marginal productivity
change in quantity/ change in labor
marginal cost
change in total cost / change in quantity
