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econ equations > costs > Flashcards

costs Flashcards

1
Q

define opp cost

A

the value of the best alternative use of the resource

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2
Q

what are sunk costs

A

start up costs that cant be recovered

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3
Q

equation for TC in the SR

A

TC = FC + VC

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4
Q

define MC

A

extra cost of producing one more unit of output

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5
Q

what does VC equate to

A

VC = wL (wage rate x labour)

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6
Q

what is the only way to increase output in the SR

A

increase labour

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7
Q

what can mc and avc be equated to

A

MC = w/MPL
AVC = w/APL

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8
Q

what affect does a specific tax per unit affect

A

tax collected is xq and it only affects VC not FC

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9
Q

how does specific tax affect mc and ac

A

will shift it upwards by the amount of the tax

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10
Q

what tax affects FC

A

Franchise or lump sum tax

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11
Q

will the firm produce more or less if imposed with a lump sum tax

A

more as it will lower ac with ever unit it produces

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12
Q

what changes regarding the cost function in the LR

A

all costs are variable in the LR so TC = VC

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13
Q

what is the isocost line

A

all combos of costs that total the same amount

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14
Q

what is the isocost line function

A

C = wL + rK

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15
Q

what is the slope of the isocost line

A

MRTS = -w/r

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16
Q

what is the lowest isocost rule

A

the firm will use the input combo on the lowest isocost line that touches the isoquant

17
Q

what is the tangency rule

A

the lowest isocost line is tangent to the isoquant at the tangent point -w/r = MRTS

18
Q

what is the last dollar rule

A

the firm minimises cost when the last dollar spent on labour adds as much output as the last dollar spent on capital

19
Q

what is the equation for the last dollar rule

A

MPL/w = MPK/r

20
Q

how does the capital price rising affect the isocost line

A

firms would employ more labour due to cheaper costs

21
Q

cost of a firm producing multiple goods

A

C(q1,0)+C(0,q2) - C(q1,q2)///c(q1,q2)

22
Q

how do we tell if it is cheaper to produce goods together or seperately

A

cheaper: SC>0
expensive: SC<0

econ equations (9 decks)

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