3.3.2 Flashcards
1
Q
Total costs
A
The cost of producing a given level of output
2
Q
Total fixed costs
A
Costs that do not change like rent
3
Q
Total variable costs
A
Costs that change directly with output
Total cost / output
4
Q
Average (total) costs
A
Total fixed costs / output
5
Q
Average fixed costs
A
Total variable costs / output
6
Q
Average variable costs
A
Change in total costs / change in output
7
Q
Marginal cost
A
The extra cost of producing one additional unit of a good
8
Q
What is diminishing marginal productivity?
A
SHORT RUN
- If a variable factor is increased when another factor is fixed there comes a point where the variable factor will bring less extra output than the previous unit. The change in total output will rise at first then fall
- Marginal output will decrease are more inputs are added in the SR so the marginal cost of production will rise
9
Q
What is returns to scale?
A
LONG RUN
- Measure focused on changing fixed inputs
- Proportion between the increase in total input and the resulting increase in output
10
Q
What is profit maximisation?
A
MR = MC
- If the marginal cost is smaller than the marginal revenue, then it is profitable for the firm to produce an extra unit of output
