Questions

Question 1

Please define price?

Answer 1

Consits of:

• production costs
• profit
• taxes

Question 2

Plese expleain the Break even point?

Answer 2

• break-even point (BEP) is the point at which cost or expenses and revenue are equal
• there is no net loss or gain
• you cover your costs with your sales

Question 3

What are opportunity costs?

Question 4

What does the total cost function represent?

Answer 4

• The total cost function represents the relationship between a firm’s total costs and the total amount of output it produces in a given time period.
• The total cost function TC(Q) shows the total costs that the firm would incur for a level of output Q.
• The total cost function is an efficiency relationship in that it shows the lowest possible total cost the firm would incur to produce a level of output,

Question 5

What are the total costs?

Answer 5

Total costs consist of:

• fixed costs, which do not vary with output
• variable costs

Question 6

What are the average costs?

Answer 6

• Average costs equal total costs divided by total output
• This average cost function exhibits economies of scale at output levels up to Q´.
• It exhibits constant returns to scale between Q´ and Q´´.
• It exhibits diseconomies of scale at output levels above Q´´

Question 7

What are marginal costs?

Answer 7

• Marginal costs represent the additional cost of producing one more unit of output
• Average costs are minimized at the point where average costs equal marginal cost
• The marginal cost function MC(Q) on the right graph is based on the total cost function TC(Q) shown in the left graph