costs and revenues Flashcards

1
Q

what is a fixed cost

A

a cost that doesnt change with output in the short run

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what is a variable cost

A

a cost that changes with output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what is average cost

A

the cost per unit produced

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

how to calculate average cost

A

total costs / units produced

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what is marginal cost

A

the extra cost incurred as a result of producing the final unit of output, only affected by variable costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

how to calculate marginal cost

A

change in total cost / change in quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

explain the shape of AC

A

decreases initially due to economies of scale, then increases due to law of diminishing returns

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

when is average cost lowest and explain what happens either side

A

when MC = AC

when MC is lower, then average cost is falling because each extra unit is smaller than average cost and so adding it on will decrease average cost further

when MC is higher, average cost is rising because each extra unit is more than the average and so when you add it on it increases the average

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what is the law of diminishing returns

A

if one variable factor of production is increased while the others stay fixed, eventually the marginal returns from the variable factor will begin to decrease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

how to calculate total revenue

A

quantity x price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

how to calculate average revenue

A

total revenue / quantity sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what is marginal revenue

A

the extra revenue received as a result of selling the final unit of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

relationship between AR and MR when perfectly elastic

A

AR = MR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

PED at midpoint and either end of demand curve

A

midpoint = (-)1
left - PED>1 very top = infinity = elastic
right - 0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what is MR when TR is maximised

A

0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly