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economics > 8. Cost and Revenue Analysis > Flashcards

8. Cost and Revenue Analysis Flashcards

1
Q

Define Money Cost.

A

Refers to the money expenses which the firm has to incur in purchasing or hiring the factor services.

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2
Q

Define Explicit Cost.

A

Money payments made by the firms to the owners of various factor services in purchasing and hiring the factor services required in the production of a commodity is known as “Explicit Cost.”

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3
Q

What is Economic Cost?

A

Sum total of both explicit and implicit cost, icluding Normal Profit.

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4
Q

What are the three types of costs Economic Cost consists of?

A
  1. Money Cost / Accounting Cost / Business Cost / Explicit Cost.
  2. Implicit Cost
  3. Normal Profit
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5
Q

What is Implicit Cost?

A

Refers to the inputed (estimated) value of inputs owned by the firm and used by it in its own production unit.

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6
Q

What is Normal Profit?

A

Defined as the minimum payment which a producer must get in order to induce him to undertake the risk involved in production.

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7
Q

What is Opportunity Cost?

A

The Opportunity Cost of producing any good is the next best alternative good that is given up to produce this good.

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8
Q

Define Real Cost.

A

Refers to the efforts and sacrifices made by the owners of factors of production used in the production of a commodity.

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9
Q

Define Private Cost.

A

Refers to the cost of production incurred by an individual firm in producing a commodity.

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10
Q

Define Social Cost.

A

Refers to the cost that the society has to bear on account of the production of a commodity.

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11
Q

What is External Cost?

A

The cost that is not borne by the firm, but is incurred by other members of the society or the entire society.

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12
Q

What is Fixed Factor and Fixed Cost?

A

Fixed Factors are factors the quantity of which can neither be increased nor decreased in the short-run.
Fixed Cost is the cost which is incurrred on fixed factors.

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13
Q

What is Variable Factor and Variable Cost?

A

Variable Factors are factors the supply of which can be easily changed by any desired quantity in the short run.
Variable Cost is the cost incurred on variable factors.

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14
Q

What is Total Fixed Cost?

A

Refers to the total cost incurred by te firm on the use of all fixed factors.

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15
Q

What is Total Fixed Cost also known as?

A

Unavoidable Cost or Supplemetary or Overhead Cost.

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16
Q

What is Total Variable Cost?

A

Refers to the total cost incurred by the firm on the use of variable factors.

17
Q

What is Total Variable Cost also known as?

A

Avoidable Cost or Direct Cost or Prime Cost.

18
Q

Define Average Fixed Cost.

A

per unit cost of fixed factors.

19
Q

Define Average Variable Cost.

A

per unit cost of the variable factors of production.

20
Q

Why is AVC Curve U-Shaped?

A

The U-Shaped AVC Follows directly from the law of Variable Proportions.

21
Q

Define Average Total Cost.

A

ATC or simply Average Cost is the per unit cost of both fixed and variable factors of production.

22
Q

Define Marginal Cost.

A

Marginal Cost is the addition to total cost as one more unit of output is produced.

23
Q

How is Marginal Curve calculated diagrammatically?

A

Diagrammatically, Marginal Curve for any level of output can be calculated by taking the slope of the total cost curve corresponding to that level of output.

24
Q

What is Long-Run Average Cost (LAC) Curve?

A

LAC is the per unit cost of factors of production used in the long-run. It shows the lowest per unit cost of producing each level of output when all inputs have been adjusted.

25
Q

What is Revenue?

A

Revenue means receipts by a firm from the sale of its product in a given period.

26
Q

What is Total Revnue?

A

Refers to the total amount of income recieved by the firm from selling a given amount of its product.

27
Q

Give the formula for Total Revenue.

A

TR = P x Q

28
Q

What is Average Revenue?

A

Average Revenue is the amount of rvenue earned per unit of the product sold.

29
Q

Give the formula for Average Revenue.

A

AR = TR/Q = PxQ/Q = P

30
Q

What is Marginal Revenue?

A

Marginal Revenue is defined as the addition to total revenue which results from the saleof one additional unit of the product.

31
Q

Give the formula for Marginal Revenue.

A

MRnth = TRn - TRn-1

economics (8 decks)

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