This chapter discusses many types of costs: opportunity cost, total cost, fixed-
ID: 1195845 • Letter: T
Question
This chapter discusses many types of costs: opportunity cost, total cost, fixed-cost, variable cost, average total cost, and marginal cost. Fill in the type of cost that best completes each sentence: What you give up for taking some action is called the is falling when marginal cost is below it and rising when marginal cost is above it. A cost that does not depend on the quantity produced is a In the ice-cream industry in the short run, includes the cost of cream and sugar but not the cost of the factory. Profits equal total revenue less The cost of producing an extra unit of output is theExplanation / Answer
(a) what you give up for taking some action is called the opportunity cost
Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.
(b) When average total cost curve is falling, marginal cost is below ATC.If the average total cost curve is rising, marginal cost is above ATC.
The two curves will cross at the minimum point on the average total cost curve.
(c) A cost that does not depend on the quantity produced is a fixed cost
fixed cost are costs that don't change from month to month and don't vary based on activities or number of goods produced. They stay exactly the same. These are easy to calculate and could be things like the set amount of rent you pay every month for your apartment or your $200 car payment. Regardless of whether you stay at your apartment 30 days during the month or 10 days during the month, the rent costs the same amount.
(d) In the ice cream industry in the short run , variable cost include the cost of cream and sugar but not the cost of the factory
Short run costs are accumulated in real time throughout the production process. Fixed costs have no impact of short run costs, only variable costs and revenues affect the short run production. Variable costs change with the output. Examples of variable costs include employee wages and costs of raw materials. The short run costs increase or decrease based on variable cost as well as the rate of production. If a firm manages its short run costs well over time, it will be more likely to succeed in reaching the desired long run costs and goals.
(e) profit equals total revenue less total cost
(f) the cost of producing an extra unit of out put is the marginal cost
marginal cost is the Increase in total cost resulting from producing another unit of output.
You get your Marginal Cost by taking your change in Total Cost divided by the change in Quantity.
Marginal Cost= Change in Total Cost / Change in Quantity