Nature Of Costs In Short Run And Long Run

Question 1

Fixed cost definition

Answer 1

Costs that do not vary in the short run with changes in output

Question 2

Variable costs definition

Answer 2

Costs that do vary with output

Question 3

The short run is…

Answer 3

The period of time when at least one factor of production is in a fixed supply

Question 4

The long run is

Answer 4

A period of time in which it is possible to alter all factors of production. As the quantity of all the resources can be altered all costs are variable

Question 5

Total costs=

Answer 5

Variable costs+ fixed costs

Question 6

Average costs

Answer 6

Often called unit costs

Total costs divided by output

Question 7

Marginal cost definition

Answer 7

The change in total costs resulting from changing output by one unit
Important for firms as they are always considering whether to increase or decrease output

Question 8

MC=AC

Answer 8

Point of productive efficiency most optimal point to produce