Supply and Costs

Question 1

1. Accounting costs

Answer 1

actual dollar or monetary value of all output

Question 2

2. Economic costs

Answer 2

theses are actual-accounting costs plus opportunity costs. Opportunity costs have to be imputed/estimated as they do not have an actual cost

Question 3

3. Short run

Answer 3

a period of time in which one resource/factor of production is fixed

Question 4

4. Long run

Answer 4

a period of time in which no resource/factor of production/input are fixed i.e all are variable

Question 5

5. Fixed Costs

Answer 5

costs that do not change occurring to output e.g rent, mortgage. If output is zero or 1,000 units fixed cost remains the same

Question 6

6. diminishing returns occur…

Answer 6

as marginal costs keep increasing and that each additional resource added to produvyion adds a decreased amount of output. As a result more resources than before are needed to increase output, meaning m.c rises

Question 7

7. Marginal Production

Answer 7

measures the change in total production attributed to each additional worker/factor

Question 8

8. Law of diminishing returns

Answer 8

refers to the idea that as more and more of a factor (input) is used with at least one fixed factor there is some point at which the increase in output will be at a decreasing rate
OR
The Law of Diminishing Marginal Returns states that as each successive unit of a
variable input is added to a fixed input marginal returns/ output will initially increase
(Increasing returns). A point will however be reached where marginal returns start to
decrease due to increasing marginal costs.

Question 9

9. Marginal Cost

Answer 9

the additional cost associated with producing one more unit / next
unit of output