[MICRO] 05 - Short Run Costs and Output Decisions Flashcards

1
Q

Determinants of Production costs (2)

A

1) Techniques of production available

2) The price of inputs

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2
Q

Definition: Sunk Costs

A

Fixed costs that occur in the short run.

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3
Q

Definition: Spreading Overhead

A

The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises. (Economies of Scale)

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4
Q

Definition: Total Variable Cost Curve

A

A graph showing the relationship between total variable costs and the level of a firm’s output.

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5
Q

Definition: Marginal Cost

A

The increase in total variable cost that results from producing one more unit of output.

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6
Q

Definition: Average ____ Cost

A

To calculate average costs we divide the type of cost we are trying to find by the output quantity q.

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7
Q

Definition: Breaking Even

A

The situation in which a firm is earning exactly a normal rate of return.

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