Costs Flashcards

1
Q

fixed costs

A

dont change with output

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2
Q

variable costs

A

vary with output

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3
Q

average cost

A

total cost divided by quantity

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4
Q

average fixed cost

A

fixed cost divided by quantity

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5
Q

average variable cost

A

variable cost divided by quantity

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6
Q

marginal cost

A

cost of producing 1 additional unit

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7
Q

short run

A

period of time which a firm is free to vary its input of 1 factor of production but faces fixed inputs of other factors of production

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8
Q

long run

A

period of time which the firm is able to vary the inputs of all its factors of production

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9
Q

law of diminishing returns

A

that a firm increasing its input of 1 factor of production while holding inputs of other factors fixed, eventually the firm will get diminishing marginal returns from the factor.

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10
Q

sunk costs

A

costs incurred by a firm that cannot be recovered if the firm ceases trading

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11
Q

what happens to the marginal cost curve

A

at first decreases as output increases, and then increases with output

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12
Q

what does a short run average cost curve show

A

relationship between the volume of production and costs under the assumption that the quantity of capital and other inputs are fixed

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