Costs

Question 1

What is the cost of production in the short run?

Answer 1

At least one of the factor inputs (CELL) is fixed. In the short run businesses are constrained with fixed and variable factors.

Question 2

What is the cost of production in the long run?

Answer 2

All factors of production (CELL) are variable, and the scale of the production can also change allowing the firm to benefit from economies of scale.

Question 3

What are fixed costs?

Answer 3

Fixed costs do not vary at all as the level of output changes.

Question 4

What are variable costs?

Answer 4

Variable costs are costs that relate directly to production or sale of a product.

Question 5

What are some causes of shifts in short run costs?

Answer 5

Changes in the unit cost production
A fall in the exchange rates
Advances in production technologies
The entry of new producers in the market
Tax, subsidies and government regulation

Question 6

What are some of the ways in which changes in governments policies can influence the cost of a business

Answer 6

Changes in VAT
Environmental taxes
Changes in labour market interventions