Economics Chapter 7 - Cost Concepts

<p>Short-run curves show the cost of production for a fixed amount of capital, while long-run curves show the cost of production for varying amounts of capital. (B)</p> Signup and view all the answers

<p>Because it envelopes all the short-run cost curves. (D)</p> Signup and view all the answers

<p>It intersects the Average Variable Cost (AVC) curve at its minimum point. (C)</p> Signup and view all the answers

<p>It encompasses multiple average cost curves for different production scales. (A)</p> Signup and view all the answers

<p>Average production costs decline as output increases. (D)</p> Signup and view all the answers

<p>18.75 (D)</p> Signup and view all the answers

<p>It allows for improved techniques, reducing costs. (C)</p> Signup and view all the answers

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

<p>Total cost (C)</p> Signup and view all the answers

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

<p>Total cost of production divided by the quantity produced (C)</p> Signup and view all the answers

<p>MC = Change in Total Cost / Change in Quantity (C)</p> Signup and view all the answers

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

<p>To determine pricing strategies based on market demand (A)</p> Signup and view all the answers

<p>Replacement cost (C)</p> Signup and view all the answers

<p>The change in total cost resulting from producing one additional unit. (B)</p> Signup and view all the answers

<p>Sunk cost refers to costs incurred prior to a decision; incremental cost is the cost of a decision made. (D)</p> Signup and view all the answers

<p>The opportunity cost of using resources owned by the entrepreneur. (A)</p> Signup and view all the answers

<p>Economic costs include both explicit and implicit costs. (C)</p> Signup and view all the answers

<p>It remains constant. (A)</p> Signup and view all the answers

<p>TVC increases with an increase in output. (B)</p> Signup and view all the answers

<p>It is a horizontal straight line. (A)</p> Signup and view all the answers

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

<p>TC always exceeds TVC because fixed cost is constant. (D)</p> Signup and view all the answers

Represents costs where fixed costs remain constant.

Represents costs with both fixed and variable costs changing.

Costs that do not change with the level of production.

Costs that change based on the level of production.

Total cost divided by the number of units produced.

Change in total cost divided by change in output.

Costs incurred that cannot be recovered once spent.

Change in total cost due to a policy or managerial decision.

Non-cash costs for using own resources in business.

Direct cash payments made for production factors.

Total of explicit costs for financial and tax purposes.

Includes both implicit and explicit costs in decision making.

Expenditure on fixed factors, constant across output levels.

The point where marginal cost intersects average variable cost indicates minimum average variable cost.

Marginal cost (MC) influences the average cost (AC); when MC is below AC, AC decreases, and vice versa.

The LAC curve is formed by the lowest points of various short run average cost (SAC) curves, representing optimal production scaling.

As production increases, the average cost decreases due to efficiencies gained from experience and learning.

Similar to the learning curve, this reflects cost reductions as firms improve production techniques over time.

Costs directly incurred by an individual or firm producing a good.

Costs incurred by society due to the production of a commodity.

The original money value spent when purchasing an asset.

Amount required to replace the existing asset.

Total expenditure on all fixed and variable factors for production.

Total Variable Cost (TVC) increases with output; starts at zero.

Total Cost (TC) is the sum of Total Fixed Cost (TFC) and Total Variable Cost (TVC).

Describes the relationship between outputs and costs, derived from the production function.

Average Fixed Cost (AFC) decreases as output increases, always positive.

Average Variable Cost (AVC) decreases, reaches a minimum, then increases with output.

Average Cost (AC) combines AFC and AVC, also U-shaped, first declines then rises.

Marginal Cost (MC) shows the additional cost of producing one more unit; U-shaped curve.

AC = AFC + AVC, MC intersects AC and AVC at their minimum points.