Chapter 7 Flashcards
Accounting cost
include the direct costs of operating a business, including costs for raw materials.
Economic cost
is the sum of a producer’s accounting and opportunity costs.
Sunk costs
form of fixed costs, or the cost of the firm’s fixed inputs, independent of the quantity of the firm’s output which can not be recovered once spent
Fixed cost curve is
horizontal
Variable cost curve..
has a positive slope getting increasingly steeper
Total cost curve…
same shape as VC, but shifted up the amount of the FC
Marginal Cost Formula (Q and TC)
Change in Total cost/ Change in Quantity
When are average total costs minimized?
When average total cost = marginal cost
Economies of Scale
Costs rise more slowly than production.
Constant Returns to Scale
Costs rise at the same rate as output.
Diseconomies of Scale
Costs rise more quickly than production.
Economies of Scope
Refers to the simultaneous production of multiple products at a lower cost than if a firm made each separately.
