Costs Flashcards
What is a semi variable cost?
Considered as a variable cost
- electricity
- alarm systems
What is an example of a sunk cost?
- advertising
- market research
What happens to the factors of production in the short run?
at least one factor of production is fixed
What happens to the factors of production in the long run?
all factors can be variable but the are not variable costs
e.g. rent can vary as it can change but not with output
What happens to revenue in the short run?
firms will continue to produce provided revenue is greater than or equal to variable costs
What happens to revenue in the long run?
the firms will only produce if revenue is greater than or equal to all costs
How does diminishing returns work on a average and marginal graph?
- total output rises but at a falling rate
- average output is rising but the output of the next worker is less than the last
When is revenue highest on a marginal graph?
when marginal is = 0
How do you calculate average total cost?
total costs / quantity
How do you calculate average variable cost?
total variable cost / quantity
How do you calculate marginal cost?
change in cost / change in quantity
Why does marginal cross average at the highest point?
When marginal is above average, the average continues to rise, once they cross they are at productive efficiency.
