2.2 Micro Flashcards
What is FC?
Fixed cost
Does not vary with output
A FC curve is a straight line
How do you work out AFC?
Total fixed cost/ output
What is VC?
Costs that vary with output
Includes costs of materials etc
The VC cost curve slope up and to the right
What is TC?
All costs
How do you work out TC?
TFC+TVC
The curve slopes up and towards the right
What is MC?
The cost of producing an additional unit of output
The MC cost curve is U-shaped
After we reach the lowest point on the curve, the next unit produced will cost more than the previous unit
What is AC?
The average cost of producing a unit of output
TC/Output
The AC curve is U-shaped
How do you work out AVC?
TVC/Output
What are SR costs?
Where at least some costs are fixed
What are LR costs?
When all costs can be variable
What are relevant costs?
Costs that are used to make decisions on an investment
What are sunk costs?
Should always be seen as irrelevant
A cost that has already occured
What is loss aversion?
Avoiding loss on investment
