55: Firm Costs

Question 1

fixed cost

Answer 1

the cost that doesn’t depend on the quantity of output produced (cost of fixed inputs)

Question 2

variable cost

Answer 2

cost that depends on the quantity of output produced, cost of variable inputs

Question 3

total cost

Answer 3

fixed + variable cost

Question 4

marginal cost

Answer 4

the added cost of producing one more unit of output

Question 5

marginal cost equation

Answer 5

∆TC / ∆Q

Question 6

graphical representation of marginal cost

Answer 6

slope of total product curve

Question 7

average total cost equation

Answer 7

TC / Q

AFC + AVC

Question 8

average fixed cost eq

Answer 8

FC/Q

Question 9

Average variable cost

Answer 9

VC / Q

Question 10

things that influence ATC

Answer 10

1) spreading effect

2) diminishing returns effect

Question 11

spreading effect

Answer 11

larger output means that there is a greater quantity over which fixed cost is spread, reducing ATC

Question 12

diminishing returns effect

Answer 12

larger output means that more variable costs are required, increasing ATC

Question 13

minimum cost output

Answer 13

quantity of output at which ATC is lowest, where ATC = MC