Chapter 12- Production And Cost Analysis 1

Question 1

Define Marginal Cost and give the equation

Answer 1

The additional cost resulting from a one-unit increase in output.
MC= ΔTC

Question 2

Define Total Cost and give its equation.

Answer 2

The sum of all costs of inputs used by a firm in production.
TC= FC + VC

Question 3

Define Average Total Cost and give the equation for it.

Answer 3

Total cost per unit of production.
ATC= AFC + AVC
ATC= TC/Q

Question 4

Define Fixed Cost and give its equation.

Answer 4

Cost that is already spent and cannot be recovered. It exists only in the short-run.
FC (given value)

Question 5

Define Average Fixed Cost and give its equation.

Answer 5

Fixed costs per unit of production.

AFC= FC/Q

Question 6

Define Variable Costs and give its equation.

Answer 6

Costs that vary with production.

VC

Question 7

Define Average Variable Cost and give its equation.

Answer 7

Variable costs per unit of production.

AVC = VC/Q

Question 8

Define Disecomomies of scale

Answer 8

When long-run average total costs increase as output increases