3.3.2 Costs Flashcards

1
Q

What are total costs?

A

How much it costs to produce at any given output level

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2
Q

How do you calculate total costs?

A

Total variable costs + total fixed costs

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3
Q

What are fixed costs?

A

Costs that do not change with output. For example rent and advertising

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4
Q

What are variable costs?

A

Costs that change with output. For example the spending on raw materials

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5
Q

How do you calculate average total costs?

A

Total costs / quantity produced

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6
Q

How do you calculate average fixed costs?

A

Fixed costs / quantity produced

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7
Q

How do you calculate average variable costs?

A

Total variable costs / quantity produced

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8
Q

What is the ‘marginal cost’?

A

How much it would cost a firm to produce one extra unit of good

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9
Q

How do you calculate marginal cost?

A

Total costs / quantity

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10
Q

How do you define short run costs?

A

Costs that occur when one factor of production is fixed

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11
Q

How do you define long run costs?

A

Costs that occur when all factors of production are variable

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12
Q

What is the ‘law of diminishing marginal utility’?

A

States that adding more units of good will lead to increased output BUT ONLY UP TO A POINT whereby more inputs leads to a fall in output

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13
Q

On the Long Run Average Cost curve, what point shows economies of scale?

A

The part that slopes down

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14
Q

On the Long Run Average Cost curve, what point shows diseconomies of scale?

A

The part that slopes upwards

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15
Q

What does one call the point when economies of scale are being fully utilised?

A

Minimum efficient scale

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16
Q

Give 3 examples of macroeconomic things that cause a change in costs?

A
  • exchange rate changes
  • leaving trading blocs
  • changes in minimum wage