Chapter 5: Production Cost

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One source of economies of scale is the mathematics of

Circles

Business operating decisions should be based on

economic profit

The shape of the long-run average total cost curve can differ for different types of firms depending on

how much production it takes to reach the minimum long-run average cost.

One reason for dis-economies of scale is increasing

opportunity cost

Implicit cost

opportunity cost of using owned resources

Average fixed cost

total fixed cost/amount of output produced

Accounting profit

total revenue - the explicit cost of production

On graph: marginal product

always intersects the average product at the maximum of the average product

The vertical distance between the average variable cost and average total cost curves gets smaller as more output is produced, because this distance is equal to the

average fixed cost, which declines as output increases

Total cost per unit is equal to

average total cost: ATC=TC/Q or AFC + AVC

On graph: Average total cost

above average fixed and average variable costs

On graph: Average variable cost

above average fixed cost but below average total cost

Marginal Product

additional output produced as a result of utilizing one more unit of a variable resource

On graph: Average fixed cost

declines throughout the range of output

Marginal Cost

extra or additional cost associated with the production of an additional unit of output

Economies of scale is a condition inwhich

the long-run average total cost of production decreases as production increases

Dis-economies of scale is a condition in which

the long-run average total cost of production increases as production increases


Conjuntos de estudio relacionados

Chapter 7: Choosing a source of credit

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