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Microeconomics
Costs of Production
| Question | Answer |
|---|---|
| Marginal cost = | (Change in total revenue)/ (change in quantity) |
| Total revenue = | Price * Quantity |
| Average fixed cost = | Fixed cost / Quantity |
| Average variable cost = | Variable cost / Quantity |
| Average total cost = | Total cost / Quantity |
| Fixed cost + Variable Cost = | Total cost |
| What is explicit cost? | Money that firms spent on things, like workers, tools, etc. |
| What is implicit cost? | Money that should have been used for something else. |
| If a person owns a office space, | The explicit cost doesn't get affected, and the accounting profit doesn't exist. The implied cost gets affected, thus affecting the economic profit. |
| If a person rents a office space, | Both explicit and implicit cost gets affected, thus affecting both economic and accounting profit. |
| Why is accounting profit greater than economic profit? | It doesn't include the implicit cost |
| What do accountant focus on, unlike the economists? | Only explicit costs |
| As the company produces more product, the marginal product decreases, which is called _____________ | Diminishing marginal product |
| What business's decision is based on..... | -Cost of land -Wage (Labor) - How many to hire |
| In a production curve, why does the curve becomes steeper as the number of quantity increases? | The marginal product is decreasing |
| As more people work for a company and the factory become crowded, the marginal product decreases, and the marginal cost _______ | Increases because it the cost of labor becomes more expensive as more people get a job. |
| A business's owner spent time is an example of_______ | Opportunity cost |
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U0105006
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