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Question 1

COST CONCEPTS

Answer 1

COST CONCEPTS
* Total cost (TC)
* Fixed cost (FC)
* Variable cost (VC)
* Marginal cost (MC)

Question 2

Total cost (TC)

Answer 2

is the sum of all payments for all inputs
- Fixed cost + variable cost

Question 3

Fixed cost (FC)

Answer 3

is the sum of all payments for fixed inputs
- Often the capital cost, like the 100 units of capital in the example

Question 4

Variable cost

Answer 4

is the sum of all payments for variable inputs
- The total labor cost

Question 5

MArginal cost

Answer 5

is the change in total cost divided by the change in output
𝑀𝐶 =𝑑𝑇𝐶 /𝑑𝑄 ≈∆𝑇𝐶 /∆𝑄

Question 6

Slope for the cost curve shows

Answer 6

how much the total cost change when quantity produced (Q) changes with one unit

Question 7

Slope for the revenue curve shows

Answer 7

how much the total revenue changes when quantity produced (Q) changes with one unit

Question 8

If now the two curves (TR and TC) must have the same slope, it must mean
that

Answer 8

MR = MC

Question 9

In full competition, we have a profit max at

Answer 9

P * = MC