Costs Flashcards
Average cost
average cost of production per unit, AVC+AFC
Diseconomies of scale
a rise in the long run average costs of production as output rises
Economic cost
the opportunity cost of an input to the production process
Economies of scale
a fall in the long run average costs of production as output rises
External economies of scale
falling average costs of production, shown by a downward shift in the average cost curve.
Fixed/Indirect/Overhead costs
costs which do not vary as the level of production changes
Internal economies of scale
economies of scale which arise because of the growth in the scale of production within a firm
Marginal cost
the cost of producing an extra unit of output
Minimum efficient scale of production
the lowest level of output at which long run average cost is minimized
Optimal level of production
the range of output over which long run average cost is lowest
Total cost
the cost of producing any given level of output, TVC+TFC
Variable/Direct/Prime costs
costs which vary directly in proportion to the level of output of a firm
