Cost of production

Question 1

Cost of production

Answer 1

Economic cost of producing the output. Includes actual costs (money) but also opportunity costs( of factors paid for). It takes into account all of effort and resources that have gone into production

Question 2

Profit

Answer 2

Total revenue received(sales) - Total costs (expenses,debt)

Question 3

Firm

Answer 3

Business organisation

Question 4

Industry

Answer 4

All firms providing similar goods or services (the biggest)

Question 5

Market

Answer 5

All firms supplying a particular good or service and the firms or people buying it

Question 6

How firms survive

Answer 6

To produce goods and service, FOP needs to be used which has a cost. In the short run, firms can break even but the need to make a profit to survive in the long run

Question 7

Short run

Answer 7

A period of time where at least one of the firm’s FOP is fixed. Costs can be fixed or variable and it has no specific length. Often under a year.

Question 8

Short run fixed costs

Answer 8

Costs that are independent of output and have to be paid whether or not anything is produced e.g. rent

Question 9

Short run variable costs

Answer 9

Costs involved in producing more units. It increases as more is produced e.g. packaging of products

Question 10

Long run

Answer 10

A time period where all FOP can be varied. Firms have time to respond to changes e.g. build a bigger factory to increase output. Usually longer than a year.