Chapter 19

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 a 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