Costs of production that do not change as output changes e.g. rent, interest on loans.
2 of 23
Variable Costs
Costs of production that change as output changes e.g raw materials.
3 of 23
Short Run
Period during which fixed costs and the scale of production cannot be changed. At least 1 variable is fixed.
4 of 23
Marginal product of labour
Addition to total output as a result of employing one extra worker.
5 of 23
Increasing marginal returns
Where the addition of an extra unit of a varibale factor adds more output than the previous unit of the same variable factor.
6 of 23
Average product
The total product divided by the number of units of a factor used- often labour.
7 of 23
Law of diminishing marginal returns
Where increasing amounts of a variable factor are added to a fixed factor and the amount added to total product by each additional unit of the variable factor eventually decreases.
8 of 23
Optimal output
The ideal combination of fixed and variable factors to produce the lowest average total costs.
9 of 23
Productive efficiency
When a firm operates at minimum average total cost, producing the maximum possible outputs from inputs into the production process.
10 of 23
Depreciation
In relation to fixed asests, a fall in the value of an assest during its working life.
11 of 23
Semi-variable costs
Costs which have both fixed and variable elements e.g landline telephone usage.
12 of 23
Average fixed costs
Total fixed costs divided by output. FC/Q
13 of 23
Average variable costs
Total variable cost divided by output. VC/Q.
14 of 23
Average total cost
Total cost divded by output. TC/Q. or ATC= AFC+AVC
15 of 23
Marginal cost
The addition to total costs as a result of making one extra unit of output. MC= change in TC/ change in output.
16 of 23
Increasing returns to scale
Where an increase in variable factor inputs leads to a more than proportionate increase in output.
17 of 23
Decreasing returns of scale
Where an increase in variable factor inputs leads to a less than proportionate increase in outputs.
18 of 23
Constant returns of scale
Where an increase in variable factor inputs leads to a proportional increase in outputs.
19 of 23
Minimum efficient scale
This corresponds to the lowest point on the long-run average total cost curve. Also known as the output of long-run productive efficiency.
20 of 23
Normal Profit
The level of profit that is enough to keep a firm in an industry or to keep an entrepreneur in their business activity. Normal profit is included in costs.
Comments
No comments have yet been made