COSTS

Question 1

TOTAL COSTS

Answer 1

Total costs = fixed costs + variable costs

Question 2

TOTAL FIXED COSTS

Answer 2

Business costs, such as rent, that are constant whatever the amount of goods produced.
Fixed Cost = Total Cost – (Variable Cost Per Unit * Units Produced)

Question 3

MARGINAL COSTS

Answer 3

The cost added by producing one additional unit of a product or service.
Marginal Cost = Change in Total Cost / Change in Quantity

Question 4

TOTAL VARIABLE COSTS

Answer 4

The total variable cost is simply the quantity of output multiplied by the variable cost per unit of output:
Total Variable Cost = Total Quantity of Output X Variable Cost Per Unit of Output

Question 5

LONG RUN AVERAGE COST

Answer 5

➳SRAC curves can touch the LRAC curve, but they cant go below it
➳In the long run a firm can change all factors of promotion
➳External diseconomies of scale will force the LRAC curve to shift upwards
➳External economies of scale will force the LRAC curve to shift downwards