Fixed and variable Costs Flashcards

1
Q

short run

A

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

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2
Q

long run

A

a period of time when all factors of production is variable

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3
Q

the two different types of costs are:

A

implicit costs and explicit costs

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4
Q

what is implicit cost

A

a businesses opportunity cost. it is the profit they couldve made while selling their next best Alternative

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5
Q

explicit costs are made of:

A

fixed costs and variable costs

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6
Q

what is a fixed cost

A

fixed costs do not vary with output so even if nothing is being produced a business has to pay fixed costs.

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7
Q

what is a variable cost

A

a cost that varies with output: a business pays more as they produce more

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8
Q

examples of fixed costs

A

1) rent
2) saleries
3) interests on loans
4) advertisments
5) business rates

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9
Q

examples of variable costs

A

1) wages
2) utility bills
3) raw material costs
4) transport costs

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