Business Costs

Question 1

Semi fixed costs

Answer 1

These are a mixture between variable and fixed costs 
Example
A telephone bill we be made up of 
>line rental 
>cost of sales

Question 2

Variable costs

Answer 2

They change directly with production, if production increases so will these

Examples
Hourly wages
Raw materials

Question 3

Average costs

Answer 3

Total costs divide output

1. In order to operate as efficiently as possible firms will want to minimise their average costs

Question 4

Marginal costs

Answer 4

This is the cost of producing one extra unit of output

Change in total costs divide by change in output

In the short term this will equate too variable costs. It is helpful to see if new
Orders should be accepted or not

Question 5

Total costs

Answer 5

Fixed costs + variable costs

Question 6

Fixed costs

Answer 6

1. They are not affected by output levels
2. They must be paid even when nothing’s produced

Examples:
Salaries and rent