Economics Chapter on Production and Costs

The maximum output that a given quantity of labor can produce.

The increase in total product from hiring one more worker, keeping other factors constant.

Total product divided by the number of workers.

All points above the total product curve are unattainable because they represent more output than possible given the current technology and resources.

All points below the total product curve are attainable but inefficient because they represent less output than could be achieved with the existing resources.

Marginal product reaches its maximum when the additional output from hiring one more worker is the highest.

Average product reaches its maximum when the average output per worker is highest.

Marginal product of labor reaches its maximum when the increase in total product from hiring one more worker is greatest.

The total product curve becomes steeper as more units of labor are employed, resulting in a higher marginal product.

The point on the average product curve where it reaches its maximum value.

When the average product curve is rising, the marginal product is less than the average product. Conversely, when the average product curve is falling, the marginal product is greater than the average product.

As a firm employs more units of a variable input (e.g., labor) while keeping the quantity of a fixed input (e.g., capital) constant, the resulting increase in total product will eventually become smaller with each additional unit of labor employed.

The law of diminishing marginal returns states that as a firm increases the amount of a variable input (like labor) used in production, while keeping other inputs fixed, the marginal product of the variable input will eventually diminish.

Average product is the total output divided by the quantity of labor used. Marginal product is the change in total product resulting from adding one more unit of labor.

Each additional worker contributes less to total output than the previous worker.

The additional output produced by using one more unit of labor.

The output produced by adding one more worker, in this case, the third worker increased the number of customers served from 64 to 80.

The output produced by an additional worker is greater than the average output per worker. This means the average output per worker is still increasing.

The average output per unit of labor.

The relationship between the quantity of labor used and the total product generated. It shows how output changes as more workers are hired.

The range of production where adding one more worker leads to a smaller increase in output. This is the point where hiring more workers is less efficient.

The point where total output is maximized. There's no increase in total output as you add more workers. Hiring more workers after this point will just decrease output.

The additional cost incurred when producing one more unit of output. Calculated by subtracting the total cost of producing (Q) units from the total cost of producing (Q+1) units.

The total cost of production divided by the quantity of output produced. It represents the average cost per unit of output.

As output increases, the average total cost (ATC) decreases, meaning each additional unit produced is cheaper than the previous one.

As output increases, the average total cost (ATC) increases, meaning each additional unit produced is more expensive than the previous one.

Total fixed cost remains the same, regardless of the quantity of output produced. It is the cost of all fixed inputs in production.

The additional cost of producing one more unit of output.

The total fixed cost divided by the quantity of output produced. It is the fixed cost per unit.

The cost of all variable inputs in production, changing according to the level of output. (Example: labor costs, raw materials)

The output level at which the long-run average total cost (LRATC) curve reaches its minimum point. This represents the most efficient scale of production where average costs are lowest.

A period of production where the firm can adjust all inputs, including the size of its plant. This allows for flexibility in optimizing production and costs.

The decrease in average total cost (ATC) as a firm increases its output in the long run. This occurs due to factors like specialization, economies of scale, and improved technology.

The increase in average total cost (ATC) as a firm increases its output in the long run. This arises from complex management, coordination issues, and other factors that hinder efficient production.

A period of production where the firm can adjust some inputs but not others, such as the size of its plant. This limits the firm's ability to optimize production and costs.

The cost of producing one additional unit of output. It is calculated by the change in total cost divided by the change in output.

The level of output where the average total cost (ATC) is minimized. This point represents the most efficient scale of operation for a given plant size.