46) Costs

Question 1

What is economic cost?

Answer 1

In economics the economic cost of production is the opportunity cost of production

Question 2

What are fixed costs?

Answer 2

(also called indirect costs or overheads) are costs that do not vary as output changes. e.g. rent or salaries

Question 3

What are variable costs?

Answer 3

(also called direct costs) are costs that do vary as output changes. e.g. raw materials or wages

Question 4

What are semi-variable costs?

Answer 4

Costs that are not fixed nor variable. e.g. electricity

Question 5

What is TC?

Answer 5

TFC + TVC

Question 6

What is AC?

Answer 6

TC / Q

Question 7

What is MC?

Answer 7

The addition to cost as a result of producing one extra unit of output

Question 8

What are diseconomies of scale?

Answer 8

Diseconomies of scale occur when a firm increases its output and this results in its LRAC increasing, this can be caused by communication, managerial or geographical issues