Costs Flashcards
Where are economic costs incurred?
When a business engages in producing/supplying an output
What are the costs in the short run?
One of the factor inputs are fixed. In the short run businesses are constrained with fixed and variable factors
What are the costs in the long run?
All factors of production are variable, and the scale of production can also change allowing the firm to benefit from economies of scale
What do variable costs relate to?
Directly to the costs that relate to the production or sale of a product
Give the definition for Average variable cost
Total variable cost/output
What is variable cost determined by?
The marginal cost of extra units as more labour is hired
What are marginal costs?
the addition to the total costs of producing one more unit
How many factor inputs are fixed in short run production?
At least one
In Long run production how many factors of production are variable?
all factors of production are variable and the scale of production can change for the firm to benefit from economies of scale
Is diminishing marginal productivity a short or long run concept?
It is a short run concept as it is used to explain the shape of curves in the short run only
What is marginal product?
The additional output produced when an extra worker is employed
