PRD-1.A—a. Define (using graphs where appropriate) key terms and concepts relating to production and cost. b. Explain (using…—Topic 3.3

a. Define (using graphs where appropriate) key terms and concepts relating to production and cost. b. Explain (using graphs where appropriate) how production and cost are related in the short run and long run. c. Calculate (using data from a graph or table as appropriate) the various measures of productivity and short-run and long-run costs.

• In the long run, firms can adjust all their inputs, and as a result, all costs become variable.
• The relationship between inputs and outputs in the long run is described by the scale of production—increasing, decreasing, or constant returns to scale.
• The long-run average total cost is characterized by economies of scale, diseconomies of scale, or constant returns to scale (efficient scale).
• The minimum efficient scale plays a role in determining the concentration of firms in a market and the market structure.
• Enduring understanding PRD-1: Firms’ production and cost constraints over different input and output levels shape optimal decisions in the short run and long run.