Average costs, variable costs, fixed costs, total costs

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  • Created by: Jade
  • Created on: 17-11-12 14:20

1. What is long run?

  • Time period when all factor inputs can be changed
  • Time period when a firm is unable to change factors of production except for one, usually labour.
  • Time period when the lowest level of output where long-run average cost (LRAC) is minimised.
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2. What is short run?

  • Time period when a firm is unable to change factors of production except for one, usually labour.
  • Time period when all factor inputs can be changed
  • Time period when the lowest level of output where long-run average cost (LRAC) is minimised.

3. In air transport, a substantial fixed cost item is the annual sum that has to be paid to?

  • Lease aircraft
  • Lease airports
  • Lease passengers

4. What are fixed costs?

  • Costs that are independent of output produced e.g. rent, interest paid on loans
  • Costs that vary directly with output produced e.g. labour, fuel, raw material costs
  • The total cost of production or provision of a service

5. What is marginal cost?

  • Marginal cost is the change in total cost that occurs when output is changed by one unit.
  • Marginal cost is the unit cost of production.
  • Marginal cost are costs that vary directly with output produced.

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10 questions on costs that can provide a break from more intensive studying.

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