[MICRO] 05 - Short Run Costs and Output Decisions Flashcards
Determinants of Production costs (2)
1) Techniques of production available
2) The price of inputs
Definition: Sunk Costs
Fixed costs that occur in the short run.
Definition: Spreading Overhead
The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises. (Economies of Scale)
Definition: Total Variable Cost Curve
A graph showing the relationship between total variable costs and the level of a firm’s output.
Definition: Marginal Cost
The increase in total variable cost that results from producing one more unit of output.
Definition: Average ____ Cost
To calculate average costs we divide the type of cost we are trying to find by the output quantity q.
Definition: Breaking Even
The situation in which a firm is earning exactly a normal rate of return.