Theme 3 - Chapter 44 Key terms Flashcards
Average cost
The average cost of production per unit, calculated by: Total cost/Quantity produced.
Average cost = Average variable cost + Average fixed cost
Average fixed cost
Total fixed cost/Number of units produced
Average variable cost
Total variable cost/number of units produced
Diseconomies of scale
A rise in the long run average costs of production as output rise
Economic cost
The opportunity cost of an input to the production process
Economies of scale
A fall in the long run average costs of production as output rises
External economies of scale
Falling average costs of production, shown by a downward shift in the AC curve. which result from a growth in the size of the industry within which a firm operates
Fixed or indirect or overhead costs
Costs which do not vary as the level of production increases or decreases
Imputed cost
An economic cost which a firm does not pay with money to another firm but is the opportunity cost of factors of production which the firm itself owns
Internal economies of scale
Economies of scale which arise because of the growth in the scale of production within a firm
Marginal cost
The cost of production an extra unit of output
Minimum efficient scale of production
The lowest level of output over which at which long run AC is lowest
Optimal level of production
The range of output over which long run AC is lowest
Semi variable cost
A cost which contains within it a fixed cost element and a variable cost element
Total cost
The cost of producing any given level of output. It’s equal to the Total variable cost + total fixed cost
