Pack 7: Costs, Revenue and Profit Flashcards
What is the short-run?
Time period where at least one factor of production cannot be varied
What is the long-run?
Time period where all factors of production can vary
What is diminishing marginal productivity/returns?
As more variable factors are added to a fixed factor, marginal product will eventually fall
What is marginal cost?
Addition to the total cost by the production of one more additional unit of output
What is the relationship of marginal cost/product?
Inverse, when cost MC rises MP falls
What is total cost?
Addition of all costs (fixed + variable)
What is fixed cost?
Costs that don’t vary with output, e.g. rent, manager salary
What is variable cost?
Costs which vary with output, e.g. raw materials, wages
What is average (total) cost? (AC)
Total cost / quantity
What is average variable cost?
Total variable cost / quantity
What is average fixed cost?
Total fixed cost / quantity
What is long run average cost?
The cost per product produced, when all factors of production are available
What are economies of scale?
Factors which cause long-run average cost to fall as the size of the firms output increases
What are the different types of economies of scale?
