2) fixed and variable costs Flashcards
when do we have the short run?
when we have at least one fixed factor of production
when do we have the long run?
when all factors of production are variable
what are the two types of costs?
implicit
explicit
what are the two types of explicit costs?
fixed
variable
what’s specific about fixed costs?
even if there’s nothing produced you must pay it
what’s specific about variable costs?
the costs vary with ouput
examples of fixed costs
rent
salaries
interest on loans
business rates
example of variable costs
wages
utility bills
raw materials
transport
what stays constant even with an increase in output?
total fixed costs
what increases as output rises?
average fixed costs
what’s the equation for average fixed costs?
total fixed costs
/
output
what’s the equation for average variable costs?
total variable costs
/
output
