Lec 1 - Introduction Flashcards
What is AC?
Average costs per production unit, that is, total costs per quantity
What is MC?
Marginal Cost is the cost of producing the next unit.
What are “Sunk Costs”?
What should be the decision reaction towards these costs?
Which decisions do they help?
Money already spent. Costs that have occured or have to occur without choive and cannot be avoided anymore.
They should be tried to minimised as much as possible.
Cannot be included in the decisions of whether to enter the market or how much to produce.
How does a Firm decide to produce or not?
When will a Firm enter the Market? (entry decision)
If the AC per unit is lower then the Price that will be received for selling, the firm will be making a profit off this sale. So it produces / enters the market.
