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Chp. 10 - Flashcards

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Class:ECO 2301 - Principles of Economics I
Subject:ECONOMICS
University:Texas Tech University
Term:Spring 2010
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Technology a firm's technology is the processes that it uses to turn inputs into outputs of goods/services. ex: skill of workers, efficiency of machinery.
Technological Change a change in the ability of a firm to produce a given level of output with a given quantity of inputs.
Positive Technological Change make output using same inputs or same output using fewer inputs.
Negative Technological Change direct opposite of positive technological change.
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Short Run at least one of the firm's inputs are fixed. ex: firm's technology and size of its physical plant are fixed while number of workers is variable.
Long Run in the long run, a firm is able to vary all of its inputs. ex: increase in technological change, changed size of physical plant.
Total Cost the cost of all inputs a firm uses in production. TC = fixed cost + variable cost
Fixed Cost costs that remain constant as output changes. ex: lease payment.
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Variable Cost costs that change as output changes. ex: electricity, cost of raw materials, labor costs.
Opportunity Cost highest alternative given up.
Explicit Cost a cost that involves spending money.
Implicit Cost non monetary opportunity cost.
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Production Function a relationship between inputs emplyed by a firm and the maximum output it can produce with these inputs. (represents technology)
Average Total Cost the total cost - quantity of output produced.
Long Run - Average Cost Curve a curve showing the lowesr cost at which a a firm is able to produce a given quantity of output in the long run, when no outputs are fixed.
Economies of Scale exist when a firm's long run average cost falls as it increases output.
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Constant Returns to Scale exists when a firm's long run average cost remains unchanged as it increases output.
Diseconomies of Scale exist when a firm's long sun average cost rises as is increases output.
Minimum Efficient Scale level of output at which all economies of scale have been exhausted.
Isoquant a curve showing all combinations of 2 inputs. ex: capital and labor that will produce the same level of output.
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Marginal Rates of Technical Substitution the slope of the isoquant; represents the rate at which a firm is able to substitute one input for another while output is constant, while keeping the same level of output.
Isocost Line all combinations of 2 inputs such as capital and labor that have the same total cost.
Expansion Path shows the firm's cost minimizing combination of inputs for every level of output.
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 Technologya firm's technology is the processes that it uses to turn inputs into outputs of goods/services. ex: skill of workers, efficiency of machinery.
 Technological Changea change in the ability of a firm to produce a given level of output with a given quantity of inputs.
 Positive Technological Changemake output using same inputs or same output using fewer inputs.
 Negative Technological Changedirect opposite of positive technological change.
 Short Runat least one of the firm's inputs are fixed. ex: firm's technology and size of its physical plant are fixed while number of workers is variable.
 Long Runin the long run, a firm is able to vary all of its inputs. ex: increase in technological change, changed size of physical plant.
 Total Costthe cost of all inputs a firm uses in production. TC = fixed cost + variable cost
 Fixed Costcosts that remain constant as output changes. ex: lease payment.
 Variable Costcosts that change as output changes. ex: electricity, cost of raw materials, labor costs.
 Opportunity Costhighest alternative given up.
 Explicit Costa cost that involves spending money.
 Implicit Costnon monetary opportunity cost.
 Production Functiona relationship between inputs emplyed by a firm and the maximum output it can produce with these inputs. (represents technology)
 Average Total Costthe total cost - quantity of output produced.
 Long Run - Average Cost Curvea curve showing the lowesr cost at which a a firm is able to produce a given quantity of output in the long run, when no outputs are fixed.
 Economies of Scaleexist when a firm's long run average cost falls as it increases output.
 Constant Returns to Scaleexists when a firm's long run average cost remains unchanged as it increases output.
 Diseconomies of Scaleexist when a firm's long sun average cost rises as is increases output.
 Minimum Efficient Scalelevel of output at which all economies of scale have been exhausted.
 Isoquanta curve showing all combinations of 2 inputs. ex: capital and labor that will produce the same level of output.
 Marginal Rates of Technical Substitutionthe slope of the isoquant; represents the rate at which a firm is able to substitute one input for another while output is constant, while keeping the same level of output.
 Isocost Lineall combinations of 2 inputs such as capital and labor that have the same total cost.
 Expansion Pathshows the firm's cost minimizing combination of inputs for every level of output.
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