3.3.2- Costs Flashcards
What is an economic cost?
Includes opportunity cost
What is fixed in the short run?
At least one factor of production
What is total cost?
The cost of producing a given level of output
What is total fixed cost?
Costs that don’t change with output
What is total variable cost?
Costs that change directly with output
What is a semi variable cost?
Behaves like a fixed cost up to a certain level of output, then is variable
What is the formula for average total cost?
Total costs / output
What is the formula for marginal cost?
Change in total cost/ change in output
What is marginal cost?
The extra cost of producing one extra unit of a good
How can labour be changed in the short run?
Can hire more workers (but may be more expensive due to short notice)
How can capital be changed in the short run?
Can buy new equipment
How can entreprise be changed in the short run?
Can think of new ideas
What FOP is fixed in the short run?
Scale of output
What is increasing returns to scale?
More workers so more output, so more productivity due to division of labour and more motivation so decrease CPU
What are diminishing returns to scale?
Cramped factories so more accidents and decreased motivation due to too many workers, so increase skiving, harder to control so reduction in productivity, so increased CPU
