Chapter 44 Flashcards
Define average cost.
The average cost of production per unit, calculated by dividing the total cost by the quantity produced. It is equal to average variable cost + average fixed cost.
Define average fixed cost.
Total fixed cost divided by the number of units produced.
Define average variable cost.
Total variable costs divided by the number of units produced.
What are diseconomies of scale?
A rise in the long run average costs of production as output rises.
What is economic cost?
The opportunity cost of an input to the production process.
What are economies of scale?
A fall in the long run average costs of production as output rises.
What are external economies of scale?
Falling average costs of production, shown by a downward shift in the average cost curve, which result from a growth in the size of the industry within which a firm operates.
Define fixed or indirect costs.
Costs which do not very as the level of production increases or decreases.
What is an imputed cost?
An economic cost which a firm does not pay for with money to another but is the opportunity cost of factors of production which the firm itself owns.
What are internal economies of scale?
Economies of scale which arise because of the growth in the scale of production within a firm.
Define marginal cost.
Marginal cost is the cost of producing and extra unit of output.
What is the minimum efficient scale of production?
The minimum efficient scale of production is the lowest level of output at which long run average cost is lowest.
What is a semi-variable cost?
A cost which contains within it a fixed cost element and a variable cost element.
Define total cost.
The cost of producing any given level of output. It is equal total variable cost + total fixed cost.
Define total fixed cost.
The value of the cost of production which does not vary, however many units are produced.
