LS3 - Costs and Revenues

Question 1

Total Costs

Answer 1

Total Fixed Costs + Total Variable Costs

Question 2

Law of Diminishing Returns

Answer 2

Less additional output per increase in unit of labour

Question 3

Fixed Costs

Answer 3

Rent, salaries, interest, business rates, advertising

Question 4

Variable Costs

Answer 4

Wages, utility bills, raw materials, transport

Question 5

Average Total Cost

Answer 5

Average Variable Cost (TVC/Q) + Average Fixed Cost

Question 6

Marginal Cost

Answer 6

Change in total cost when one additional unit of output is produced (∂TC/∂Q)

Question 7

Total Revenue

Answer 7

Price x Quantity

Question 7

Marginal Revenue

Answer 7

Additional revenue from sale of an additional unit of input - ∂TR ÷ ∂Q

Question 8

Perfect vs Imperfect Competition

Answer 8

PC: firms are price takers, they have no control over the price set by the market mechanisms - TR graph is a upward linear slope; MR/AR graph is a horizontal line representing price
IC: firms are price makers, they have control over the price at which they sell g/s - TR graph is a downwards parabola; AR graph is now D line, MR graph can be negative, and has a steeper -ve gradient than AR