Chapter 18

Question 1

Fixed costs

Answer 1

Costs that do not vary with the number of items produced (in the short run).

Question 2

Variable costs

Answer 2

Costs that vary directly with the number of items sold or produced.

Question 3

Total costs

Answer 3

Fixed costs plus variable costs.

Question 4

Average costs

Answer 4

Total costs divided by number of units sold/produced; also called cost per unit.

Question 5

Economies of scale

Answer 5

Factors that lead to a reduction in average costs as a business increases in size.

Question 6

Diseconomies of scale

Answer 6

Factors that lead to an increase in average costs as a business increases in size,

Question 7

Break-even output

Answer 7

The quantity that must be sold for total costs to equal total revenue.

Question 8

Break-even chart

Answer 8

Graphs that show how costs and revenue of a product change at different
output levels - showing the B-E point

Question 9

Contribution

Answer 9

Selling price minus variable cost per unit