Cost Function Overview

False (B)

It implies that costs fall to a minimum and then begin to rise due to the law of diminishing marginal product.

<p>decreasing</p> Signup and view all the answers

<p>Marginal Cost = Cost of providing one more unit Average Total Cost = Total cost divided by output Average Variable Cost = Variable cost divided by output Average Fixed Cost = Fixed cost divided by output</p> Signup and view all the answers

<p>Cost determines the price and profit from sales (C)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Payments made to non-owners for resources used in production.</p> Signup and view all the answers

<p>output</p> Signup and view all the answers

<p>Explicit cost = Payment made to non-owners for resources Implicit cost = Opportunity cost of owned resources Total fixed cost = Cost that stays the same regardless of production Total variable cost = Cost that varies with the level of production</p> Signup and view all the answers

<p>Interest earnings from a bank account (D)</p> Signup and view all the answers

<p>$300,000</p> Signup and view all the answers

<p>It is equal to zero. (B)</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>Average Fixed Cost</p> Signup and view all the answers

<p>increases</p> Signup and view all the answers

<p>TC = Total Cost TFC = Total Fixed Cost TVC = Total Variable Cost AFC = Average Fixed Cost</p> Signup and view all the answers

<p>Total Fixed Cost (D)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Labor, utility, or raw materials</p> Signup and view all the answers

<p>Average Total Cost</p> Signup and view all the answers

The relationship between a firm's output and the cost of producing that output.

Payments made to non-owners for resources used by a firm (e.g., salaries, materials).

Opportunity cost of resources owned by the firm (e.g., owner's salary, rent for owned building).

The cost that does not change with the level of output.

The cost that varies directly with the level of output.

The expense incurred in producing a product or service.

The amount a customer is willing to pay for a product or service.

The cost of producing one more or one less unit of output.

The total cost divided by the quantity of output produced, representing the cost per unit.

Typical cost curves (except AFC) initially decrease, reach a minimum, and then increase due to diminishing marginal returns.

Adding more variable inputs (like workers) results in smaller and smaller increases in output. Eventually, adding more causes output to decrease.

Total fixed cost divided by the quantity of output.

The sum of all costs incurred in producing a given level of output. It includes both fixed and variable costs.

Costs that remain constant regardless of the level of output. These costs are incurred even if no output is produced.

Costs that fluctuate directly with the level of output. They increase as production increases and decrease as production decreases.

The total cost per unit of output. It's calculated by dividing the total cost by the quantity produced.

The variable cost per unit of output. It's calculated by dividing the total variable cost by the quantity produced.

The additional cost incurred by producing one more unit of output.

Total Cost (TC) is always equal to the sum of Total Fixed Cost (TFC) and Total Variable Cost (TVC). This relationship holds true at any level of output.

Average Total Cost (ATC) can be calculated in two ways: 1) Dividing total cost (TC) by the quantity of output (Q); 2) Adding Average Fixed Cost (AFC) and Average Variable Cost (AVC).

Costs expressed per unit of output. They help businesses understand the cost of producing each individual item.