Stuff

Question 1

Sunk Costs

Answer 1

Costs which cannot be recovered

Question 2

Oppurtunity Cost

Answer 2

The foregone benefit from not applying the resource in the best alternative use. Therefore firms should ignore sunk costs.

Question 3

User Cost of Capital

Answer 3

Is the opportunity cost:
= foregone interest + economics depreciation
= interest rate + depreciation

Question 4

Economies of Scale

Answer 4

MC

Question 5

Constant Costs

Answer 5

AC Constant with q so MC= AC

Question 6

Diseconomies of Scale

Answer 6

AC Increases with Q so MC > AC

Question 7

Efficient Scale

Answer 7

Level of Output where AC is minimized. AC=MC. Efficient Scale influences the firm size in an industry.

Question 8

what can efficient scale influence?

Answer 8

Efficient scale can influence firm in size in an industry:
Suppose there is a firm that is much larger than the efficient scale ( high AC)

other firms ay want to enter the market

Question 9

Economies of Scope

Answer 9

Cost Savings associated with the joint simultaneous production of several products.
Cost of producing two products together is cheaper than making them separately

Question 10

Learning Effects

Answer 10

Costs savings that arise from repetition, pracise or experience of on going production
Todays output affects tomorrow’s costs

Question 11

Learning Curve Strategy

Answer 11

Overproduce now for lower costs in future

Need to be undertaken with care there are risks associated with following strategy