AP Micro Unit 3 Flashcards

Front

Total Product

Back

output produced by a firm

Front

Marginal Product (MP)

Back

change in output from one more unit of input

Front

Law of Diminishing Marginal Returns

Back

marginal product decreases as more input is added

Front

Fixed Costs (FC)

Back

costs that do not change as output changes (they are typically associated with costs of capital, which is fixed in the short run)

Front

Variable Costs (VC)

(or total variable cost: TVC)

Back

costs that change as output changes (typically associated with labor costs; TVC increases as output increases and decreases as output decreases in the short run).

Front

Total Cost (TC)

Back

the sum of fixed and variable costs at a given level of output

(Common Presentations: TC = FC + VC or

TC = TFC + TVC or

TC = ATC x Q)

Front

Average Total Cost (ATC)

Back

the per unit cost of production

(Common presentations: ATC = TC/Q or

ATC = AFC + AVC)

Front

Average Variable Cost (AVC)

Back

the per unit cost of variable inputs

(Common Presentations: AVC = TVC/Q or

AVC = VC/Q or AVC = ATC - AFC or

AVC = Wage/APP)

Front

Average Fixed Cost (AFC)

Back

the per unit cost of fixed inputs

(Common Presentations: AFC = TFC/Q or

AFC = FC/Q or AFC = ATC - AVC)

AFC will ALWAYS decrease as output increases!

Front

Marginal Cost (MC)

Back

the additional cost (or change in total cost or change in total variable cost) as a result of producing an additional unit of output

(Common Presentations: MC = ΔTC/ ΔQ or

MC = ΔTVC/ΔQ or

MC = Wage/MPP)

MC initially decreases at low levels of output (due to increasing returns to labor) and increases at high levels of output (due to onset of diminishing returns to labor).