3.7 Firms' Costs, Revenue & Objectives

Question 1

What are the different types of cost on the microeconomic level (and how are they calculated)?

Answer 1

• Fixed costs, don’t change with level of output (fixed x quantity)
• Variable costs, change with level of output (variable x quantity)
• Total costs (fixed + variable)

Question 2

What are the different types of revenue (and how are they calculated)?

Answer 2

• Total revenue, value of all sales (price x quantity sold)
• Average revenue, revenue per unit (total revenue/quantity sold)

Question 3

What are the objectives of firms?

Answer 3

• Profit maximisation
• Growth (in size)
• Survival
• Social welfare