Questions and Answers
What is the best definition of technology in economics?
The process a firm uses to turn inputs into outputs.
What is defined as positive technological change? (Select all that apply)
Give an example of technological change.
Being able to produce more output using the same inputs, being able to produce the same output using fewer inputs, and a decline in the quantity of output that can be produced from a given quantity of inputs.
What is technological change?
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What is a positive technological change?
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What is an implicit cost?
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What is the production function?
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What is the short run?
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What is the long run?
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What is the relationship between marginal product and average product?
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What is the average product of labor?
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What is the marginal product of labor?
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Whenever the marginal product of labor is less than the average product of labor, the average product of labor must be increasing.
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Graphically, how is the marginal cost curve described?
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What is total cost (TC)?
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What is variable cost (VC)?
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What is fixed cost (FC)?
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What is marginal cost (MC)?
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What are economies of scale?
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What are diseconomies of scale?
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What are constant returns to scale?
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Study Notes
Technology in Economics
- Technology refers to the processes firms use to convert inputs into outputs of goods and services.
- Positive technological change allows firms to produce more output with the same inputs or the same output using fewer inputs.
Production Function
- The production function illustrates the relationship between inputs used by a firm and the maximum output attainable.
Time Frames in Production
- Short run: A period where at least one input is fixed, limiting production flexibility.
- Long run: A period where all inputs can be varied, allowing firms to adopt new technology and change their physical capacity.
Product Measures
- Marginal product of labor: Additional output generated from hiring one more worker.
- Average product of labor: Total output divided by the number of workers.
- The relationship between marginal and average product: If marginal product exceeds average product, the average must be rising, and if it is less, the average must be decreasing.
Costs in Production
- Total cost (TC): The complete cost incurred from all inputs in production.
- Variable cost (VC): Costs that fluctuate with the level of output.
- Fixed cost (FC): Costs that remain unchanged regardless of output levels.
- Marginal cost (MC): The additional cost of producing one more unit.
Economies of Scale
- Economies of scale describe the reduction in long-run average costs as a firm increases production output.
- Diseconomies of scale result in rising long-run average costs as output increases, often due to inefficiencies.
- Constant returns to scale occur when long-run average costs remain stable with increased output.
Implicit Costs
- Implicit cost: A non-monetary opportunity cost that represents the benefits foregone from the next best alternative when resources are allocated to a specific use.
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Description
Test your knowledge of key concepts in microeconomics with these flashcards focusing on Chapter 11. Learn important definitions related to technology, input-output processes, and technological changes in production. Perfect for students preparing for exams or wanting to reinforce their understanding of the material.