4.4 Costs Of Production Flashcards
What does production do?
Converts inputs into outputs without considering the the money costs of inputs(such as land and labour)
Equation for total cost?
Total cost= total fixed cost +total variable cost
Equation for average total cost?
Average total cost= average fixed cost +average variable cost
What are short run costs?
Where at least one of the four variables are fixed
What are shortnrun costs made up of?
Fixed costs and the costs incurring
How are long run costs different to short run costs?
They are always changing (variable)
-fixed costs do not exist
What is a variable cost?
Cost of production which changes with the amount that is produced
What are fixed costs associated with?
Paying for the fixed factors of production
What factor of production is often associated with variable costs?
Labour because it is continuously changing
What happens when a firm increases its output?
The total cost of production increases
What is the average cost
Total cost/size of output produced
What is marginal cost?
Addition to the cost resulting from producing one additional unit of output
Average Variable cost?
Total variable cost/size of output
Give some basic examples of a fixed cost?
-rent or maintenance on buildings
How do average fixed cost change
1 million cost
1car-1million
2 car-500k etc
Diagram for a firms short run average fixed cost (AFC) curve
Diagram for a firms short-run average costs?
ATC=AVC + AFC
Diagram for deriving the MC curve and AVC curve from the marginal and average returns curve
Where does MC cut through ATC?
Lowest point
Costs for a firm diagram
