Fixed and variable Costs Flashcards
short run
a period of time when there is at least one fixed variable in the factors of production
usually there are two fixed factors: land and capital
long run
a period of time when all factors of production is variable
the two different types of costs are:
implicit costs and explicit costs
what is implicit cost
a businesses opportunity cost. it is the profit they couldve made while selling their next best Alternative
explicit costs are made of:
fixed costs and variable costs
what is a fixed cost
fixed costs do not vary with output so even if nothing is being produced a business has to pay fixed costs.
what is a variable cost
a cost that varies with output: a business pays more as they produce more
examples of fixed costs
1) rent
2) saleries
3) interests on loans
4) advertisments
5) business rates
examples of variable costs
1) wages
2) utility bills
3) raw material costs
4) transport costs