Questions and Answers
What are variable costs?
What defines fixed costs?
Expenses that do not change as a function of business activity within the relevant period.
Marginal cost refers to the change in total cost when the quantity produced is increased by _____ unit.
one
What makes up total costs in economics?
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How do you calculate total average costs?
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What are total variable costs?
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Economic cost includes opportunity cost when analyzing _____ decisions.
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What does accounting cost refer to?
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Study Notes
Variable Costs
- Variable costs fluctuate with production volume; they increase as production rises and decrease with lower output.
- Distinguishable from fixed costs, which remain constant regardless of production levels.
Fixed Costs
- Fixed costs are stable expenses that do not change based on business activity within a specific time frame.
- Common examples include rent and utility bills, which a retailer must pay regardless of sales performance.
Marginal Costs
- Marginal cost represents the change in total cost when producing one additional unit of a good.
- It accounts for any extra costs incurred in the production process for that next unit, impacting pricing and production decisions.
Total Costs
- Total costs encompass all expenses incurred from production or during business operations.
- Composed of both variable and fixed costs, providing a comprehensive overview of financial commitments.
Total Average Costs
- Average cost is calculated by dividing total cost by the quantity of goods produced.
- It combines average variable costs and average fixed costs, offering insights into pricing and production efficiency.
Total Variable Costs
- Total variable costs stem from variable costs, which change in direct proportion to production levels.
- They represent the cumulative marginal costs over all units produced, crucial for understanding cost behavior.
Economic Cost
- Economic cost evaluates the cost of a chosen option against the potential benefit of the next best alternative.
- Includes opportunity costs, exemplified by the financial implications of choices like attending college.
Accounting Cost
- Accounting cost quantifies the monetary resources utilized in carrying out an activity.
- This term is closely related to economic cost but focuses solely on explicit financial expenditures.
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Description
Test your understanding of key economic concepts with these flashcards focused on variable and fixed costs. Learn the differences between these types of costs and how they impact business operations. Perfect for economics students looking to reinforce their knowledge.
