Definitions for C4 test Flashcards
What are fixed costs?
cost that does not vary with output
What is an example of a fixed cost?
rent, capital goods, factories
What are variable costs?
cost that varies with output
as output increases, variable costs increases
What are total costs?
total fixed costs + total variable cots
What’s an example of a variable cost?
raw materials
what are marginal costs?
addition to total cost resulting from producing one additional unit of output
What are sunk costs?
costs that cannot be recovered if business closes
What is an example of a sunk cost?
advertising
What is the formula for average fixed costs?
total fixed cost / output
What is the formula for average variable costs?
total variable cost / output
What is the formula for average total costs?
total cost / output
What is the short run?
time period where at least one factor of production is fixed
What is the long run?
where all factors of production are variable
What is the minimum efficient scale?
lowest point on the curve
What are factor prices?
prices that firms pay for hiring the different factors of production
