Costs Flashcards
1
Q
Fixed Costs
A
Do not vary with output
2
Q
Variable Costs
A
Costs that vary with output
3
Q
Examples of fixed costs
A
Salaries Advertising Rent Interest Repayments Insurance
4
Q
Average fixed costs…
A
fall as output increases. This is because total fixed costs are spread over more units sold.
5
Q
Examples of variable costs
A
Wages,
Raw Material Costs
Fuel Costs
6
Q
Law of Diminishing Returns dictates…
A
shape of the AVC curve. The minimum point is optimal point of output.
7
Q
Whilst curve is decreasing…
A
workers are specialising, underutilised FOP, increase in marginal gains. Therefore productivity increases.
