Chapter 16 (Costs and revenues)

Question 1

Average cost (AC)

Answer 1

Cost per unit of output (AC=TC/Q)

Question 2

Average revenue (AR)

Answer 2

Value of sales gained per unit of product (AR=TR/Q)

Question 3

Cost

Answer 3

Sum of money spent by a business in the process of production

Question 4

Direct costs

Answer 4

Costs specific to the production of a particular product (NOT influenced by level of output)

Question 5

Fixed costs

Answer 5

Costs that exist even when there is no output (NOT influenced by level of output)

Question 6

Indirect costs (overheads)

Answer 6

Costs that isn’t specific to the production of a specific product (NOT influenced by level of output)

Question 7

Price

Answer 7

The amount a customer pays for a product

Question 8

Profit

Answer 8

Positive difference between the revenue and costs

Question 9

Revenue

Answer 9

The amount a business earns from sales (R=P*Q)

Question 10

Revenue stream

Answer 10

Money coming into a business from its various business activities that’s not sales

Question 11

Running costs

Answer 11

Ongoing costs of operating the business

Question 12

Set-up costs

Answer 12

Costs to start a business

Question 13

Total costs

Answer 13

Sum of variable and fixed costs of production

Question 14

Total revenue

Answer 14

Sum of all the money coming into the business

Question 15

Variable costs

Answer 15

Costs of production that IS influenced by the level of output