Ch.16-Costs, scale of production and break-even analysis Flashcards

1
Q

Fixed cost

A

Costs that do not change with outpu

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2
Q

Variable costs

A

Costs that change in direct proportion to output

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3
Q

Total cost

A

All the variable and fixed costs of producing the total output

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4
Q

Average costs

A

The cost of producing a single unit of output

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5
Q

Economies of scale

A

The reduction in average costs as a result of increasing the scale of operations

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6
Q

Diseconomies of scale

A

Factors that cause average costs to rise as the scale of operations increases

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7
Q

Break-even

A

the level of output where revenue equals total costs; the business is making neither profit nor loss

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8
Q

Margin of safety

A

The difference between the current level of output and break-even output

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