chapter 22 - firms costs, revenue & objectives Flashcards
definition of:
cost of production
a firm’s expenditure in the prices of producing goods or providing services
e.g wages, utility bills, rent, salaries, purchases of raw materials
definition of:
fixed cost
cost that a firm has to pay irrespective of how much it produces or sells
e.g. salaries, insurance, rent, bank loan
definition of:
average fixed cost
fixed cost per unit
formula= fixed cost/ output level
definition of:
variable cost
cost that varies when level of output changes
e.g. purchases of raw materials, wages
definition of:
average variable cost
variable cost of production per unit of output
formula= variable cost/ output level
definition of:
total costs
sum of all fixed costs and variable costs of production
definition of:
average total cost
total cost of making one product
formula= total costs/ output level
definition of:
revenue
money payable to a business from the sale of its product
definition of:
total revenue
the aggregate amount of money a firm receives from selling goods and services
formulas= price x quantity sold
definition of:
average revenue
typical price received from the sale of a good or service
formula= total revenue/ quantity sold
definition of:
objectives
the goals or targets of an organisation
objectives of firms
- business survival
- profit maximisation
- growth
- social welfare
