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11 Cards in this Set

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Quantity and combination of inputs it needs to produce its product;And how much those inputs cost

To calculate costs, a firm must know two things

Fixed cost

Any cost that does not depend on the firms level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run.

Variable cost

cost that depends on the level of production chosen.

Total cost (TC = TFC + TVC)

Fixed cost plus variable cost

Total Fixed Costs (TFC) or Overhead

The total of all costs that do not change with output even if output is zero

Sunk cost

Firms have no control over fixed costs in the short run

Average fixed cost

Total fixed cost divided by the number of units of output; a per-unit measure of fixed costs

Spreading overhead

The process of dividing total fixed costs by more units of output. Average fixed cost declines as quantity rises

Total variable cost

The total of all costs that vary with output in the short run

TVC curve

A graph that shows the relationship between total variable cost and the level of a firm’s output

1) Techniques of production that are available2) The prices of the inputs required by each technology

At any given point of output, TVC depends on