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20 Cards in this Set
- Front
- Back
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actual expenses plus depreciation costs for capital equipment |
accounting cost |
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cost to the producer of using inputs in production |
economic cost |
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Economic Cost = |
Opportunity Cost |
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the value of a resource in its next best use |
opportunity cost |
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monetary expenditures |
explicit costs |
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do not involve expenditures |
implicit costs |
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costs to ignore when making decisions |
sunk costs |
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policy of treating a one-time expenditure as an annual cost spread out over a number of years |
amortization |
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relationship between output and costs |
cost function |
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time period during which one of the firm's inputs is fixed |
short run |
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the relationship between output and total costs, for a fixed plant scale |
short-run total cost function |
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costs that do not vary with level of output |
fixed costs |
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only way a firm can eliminate its fixed costs |
shutting down |
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costs that vary with level of output |
variable costs |
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Total Costs = |
Fixed Costs + Variable Costs
TC = FC + VC |
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increase in cost resulting from the production of one extra unit of output |
marginal cost |
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Marginal Cost = |
Change in Total Cost / Change in Quantity
Change in Variable Cost / Change in Quantity |
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firm's total cost divided by its level of output |
average total cost (ATC) |
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fixed cost divided by the level of output |
average fixed cost (AFC) |
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variable cost divided by the level of output |
average variable cost (AVC) |
