Topic 2 Flashcards
___costs that change as output levels change.
Variable cost
____costs that do not vary with output.
Fixed costs
____costs that appear on the financial statements of a company.
Accounting Cost
____additional costs that do not appear on the financial statements of a company. These costs include items such as the opportunity cost of capital.
Implicit costs
____the cost that creditors charge for use of their capital.
Interest
True regarding accounting profit and econmoic profit?
A firm may have a negative economic profit and a positive accounting profit simultaneously.
____occurs when you ignore relevant costs, those costs that do vary with the consequences of your decision.
Hidden-cost fallacy
Hidden-cost fallacy occurs when you ignore_______, those costs that do vary with the consequences of your decision.
Relevant cost
f you take account of irrelevant costs or benefits, that is the_____.
sunk- or fixed-cost fallacy
f a firm is earning negative economic profits, it implies?
that more information is needed to determine accounting profits.
Opportunity costs arise due to?
resource scarcity
The fixed-cost fallacy occurs when?
Firm consider irrelevant cost and overhead/depreciation
When a firm ignores the opportunity cost of capital when making investment or shutdown decisions, this is a case of?
Hiddencost fallacy
When economists speak of “marginal,” they mean
Incremental
If a firm’s average cost is rising, then?
marginal cost is greater than average cost.
