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23 Cards in this Set
- Front
- Back
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accounting cost
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actual expenses plus depreciation charges for capital equipment
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economic cost
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cost to a firm of utilizing economic resources in production, including opportunity cost.
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opportunity cost
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cost associated with opportunities that are forgone when a firm's resources are not put to their best alternative use.
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sunk cost
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expenditure that has been made and cannot be recovered
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Total cost (TC)
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total economic cost of production, consisting of fixed and variable costs.
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fixed cost (FC)
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Cost that does not vary with the level of output and that can be eliminated only by going out of business.
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variable cost (VC)
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Cost that varies as output varies
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marginal cost (MC)
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increase in cost resulting from the production of one extra unit of output
MC = delta VC / delta q = delta TC/ delta q |
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average total cost (ATC)
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Firm's total cost divided by its level of output
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Average fixed cost (AFC)
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fixed cost divided by the level of output
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average variable cost (AVC)
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variable costs divided by the level of output
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rental rate
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Cost per year of renting one unit of capital
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isocost line
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Graph showing all possible combinations of labor and capital that can be purchased for a given total cost
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expansion path
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curve passing through points of tangency between a firm's isocost lines and its isoquants
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long-run average cost curve (LAC)
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curve relating average cost of production to output when all inputs, including capital, are variable.
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short-run average cost curve (SAC)
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curve relating average cost of production to output when level of capital is fixed
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long-run marginal cost curve (LMC)
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curve showing the change in long-run total cost as ouput is increased incrementally by 1 unit
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economies of scale
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output can be doubled for less than a doubling of cost
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diseconomies of scale
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a doubling of output requires more than a doubling of cost
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economies of scope
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joint output of a single firm is greater than output that could be achieved by two different firms when each produces a single product
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diseconomies of scope
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joint output of a single firm is less than could be achieved by separate firms when each produces a single product.
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degrees of economies of scope
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percentage of cost savings resulting when two or more products are produced jointly rather than individually
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learning curve
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graph relating amount of inputs needed by a firm to produce each unit of output to its cumulative output
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