Chapter 7 Flashcards Preview

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Flashcards in Chapter 7 Deck (12):
1

Accounting cost

include the direct costs of operating a business, including costs for raw materials.

2

Economic cost

is the sum of a producer’s accounting and opportunity costs.

3

Sunk costs

form of fixed costs, or the cost of the firm’s fixed inputs, independent of the quantity of the firm’s output which can not be recovered once spent

4

Fixed cost curve is

horizontal

5

Variable cost curve..

has a positive slope getting increasingly steeper

6

Total cost curve...

same shape as VC, but shifted up the amount of the FC

7

Marginal Cost Formula (Q and TC)

Change in Total cost/ Change in Quantity

8

When are average total costs minimized?

When average total cost = marginal cost

9

Economies of Scale

Costs rise more slowly than production.

10

Constant Returns to Scale

Costs rise at the same rate as output.

11

Diseconomies of Scale

Costs rise more quickly than production.

12

Economies of Scope

Refers to the simultaneous production of multiple products at a lower cost than if a firm made each separately.