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ECONOMICS
concept of cost
| Question | Answer |
|---|---|
| examples factor inputs | land , labour ,capital |
| examples of non factor inputs | (raw materials) |
| difference between explicit and implicit cost | explicit-purchase of inputs from the market (hiring of abour implicit- expenditure of self owned inputs (family as labour , his own land) |
| why is cost always measured in opportunity cost? | Because of scarcity, every time we do one thing we necessarily have to forgo doing something else desirable. |
| selling cost | expenditure incurred in promotion of the sale (advertisement ) |
| production cost | expenditure incurred for the producer on the input for production of the good |
| short run period | is a period when some factors are fixed and some are variable ,fixed factors cant be changed in a short time |
| fixed cost | these cost do not change with the volume of output produced even when output is zero fixed cost still occurs(other words supplementary cost ,overhead cost , indirect cost)(ex:expenditure on plant and machinery wages and salaries of permanent staff,) |
| draw a schedule and graph on TFC (total fixed cost ) and give findings from graph | tb page no 288 |
| what is variable cost and give examples of it | these cost change with the volume of output ,as output increases cost will also increase and when output is zero cost will also be zero,(also called as prime or direct costs) ex: cost of raw materials ,wages of casual workers ,expense on electricty |
| draw a schedule and graph for TVC (TOTAL VARIABLE CURVE ) and give your findings | pg 289 |
| difference between fixed and variable cost (3 points ) | pg290 |
| draw a curve with tvc tfc and tc and tell ur findings about tc | diagram is pg 292 tc tc is parallel to the tvc curve it shows the difference between tc and tvc as (tc-tvc=tfc) tc is the summation of tfc and tvc the gap between tvc and tc stays constant as tfc is constant |
| average cost | cost per unit produced |
| draw afc curve and give the findings | pg294 afc afc curve is a rectangular parabola as output increases afc diminish slopes downward towards the right |
| draw AVC curve and give the findings | pg 295 AVC AVC IS U SHAPED AVC IS U SHAPED DUE TO LAW OF VARIABLE PROPOTION IT FALLS WHEN RETURN OF FACTORS ARE INCREASING IT RISES WHEN RETURN OF FACTORS ARE DECREASING |
| define law of variable law of proportion | If a producer increases the units of a variable factor while keeping other factors fixed, then initially the total product increases at an increasing rate, then it increases at a diminishing rate, and finally starts declining |
| what is a vertical summation and ac is the vertical summation of ? | vertical summation is vertically adding up of values like ac is the vertical summation of afc and avc |
| explain the 3 stages of prodcution which impart U-shape to the ac curve | AC curve is U-shaped in accordance with the law of variable proportions: it tends to fall owing to increasing returns to a factor, it tends to stabilise owing to constant returns to a factor, and it tends to rise owing to diminishing returns to a factor. |
| can ac and avc ever be equal? | no they cant as ac is the vertical summation of avc and afc and afc is always fixed so ac is always more than avc |
| as output increases ac tends to be closer to avc why ? | this is because tfc remains constant at all levels of output |
| define MARGINAL COST (mc) | marginal cost is the increase in tc due to addition of one unit of output |
| draw the mc schedule and the graph and give ur findings | pg298 |
| why is ΣMC=TVC | this is beacause the area under mc curve is tvc |
| why is mc curve only variable cost | this is because additional cost cannot be fixed cost |
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