CHAPTER 44 COSTS Flashcards
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.
Average fixed cost
Total fixed cost divided by the number of units produced.
Average variable cost
Total variable cost divided by the number of units produced.
Diseconomies of scale
A rise in the long run average costs of production as output rises.
Economic cost
The opportunity cost of an input to the production process.
Economies of scale
A fall in the long run average costs of production as output rises.
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.
Fixed or indirect or overhead costs
Costs which do not vary as the level of production increases or decreases.
Imputed cost
An economic cost which a firm does not pay for with money to another firm but is the opportunity cost of factors of production which the firm itself owns.
Internal economies of scale
Economies of scale which arise because of the growth in the scale of production within a firm.
Marginal cost
The cost of producing an extra unit of output.
Minimum efficient scale(MES) of production
The lowest level of output at which long run average cost is minimized.
Optimal level of production
The range of output over which long run average cost is lowest.
Semi-variable cost
A cost which contains within it a fixed cost element and a variable cost element.
Total cost
The cost of producing any given level of output. It is equal to total variable cost + total fixed cost.
