Finals: Lesson 1

• it is one important determinant of the cost of a commodity

  production function
• it is the other determinant of cost

  price of inputs
• the cost of a commodity with a profit margin determines the ____

  price of the commodity
• When the supply curve interacts with demand curve, the point of intersection gives the ______

  equilibrium price and quantity
• it is one of the determinants of supply

  cost of production
• True or False: Producers have greater ability and willingness to supply a product that has a lower cost of production

  True
• True or False: Higher cost of production results in lower price of products

  False: higher
• Lower cost means lower price

  Lower price means more sales and more profit
• it is defined as the payment made to the factors of production used in the production of the commodity.

  cost
• it is a multivariate function, i.e., it shows relationship between total cost and its determinants

  cost function
• what is the long-run cost function

  C = f (Q, T, Pf)
• what does this letter represents in the cost function

  C=

  Q=

  T=

  Pf=

  K=

  C = Total cost

  Q = Output

  T = Technology

  Pf = Price of factors

  K = Fixed factor(s)
• it is the cost of alternative opportunity sacrificed or given up.

  opportunity cost
• opportunity cost is also called

  alternative cost
• it is the actual expenditure incurred by a firm to purchase or hire the inputs it needs in the production process is called

  explicit cost
• Explicit cost is also known as direct costs, accounting cost or money cost
• Explicit cost is also called Expenditure cost
• these are payments to owners of the factors of production like wages, interests, electric bills, and so forth.

  explicit costs
• Implicit Cost is the cost of inputs owned by the firm and used by the firm in its own production process.
• Implicit Costs are also called non-expenditure costs.
• type of cost where the factors of production belong to the users. So, they do not pay. You do not pay rent on your land

  implicit cost
• it is the money cost incurred by a firm in producing a commodity

  Private Cost
• it is the cost of producing a commodity to the society as a whole. It includes real cost which is cost borne by the society, directly or indirectly, due to the produced commodity

  Social Cost
• it is the cost that does not change with change in output

  fixed cost
• fixed cost is also called

  overhead cost or supplementary cost
• Variable Costs are also called

  Prime Costs
• it is that costs that vary/change with the quantity of output produced.

  Variable Cost
• it is the cost to a firm of utilizing economic resources in production, including opportunity cost.

  Economic Costs
• it is the actual expense plus depreciation charges for capital equipment.

  Accounting Costs
• it is the sum total of cost of production

  total cost
• What is the formula for total cost?

  FC+VC
• Total Costs is composed with _,_,_,_ which are known as factor payment


  wages, rents, interests and normal profit
• it is an amount that is sufficient to encourage an entrepreneur to remain in business.

  normal profits
• it is an amount which is in excess of the cost of production

  pure profits
• are the costs over a period during which some factors are in fixed supply, like plant, machinery, etc.

  short-run costs
• are the costs over a period long enough to permit changes in all factors of production

  long-run costs
• Variable factors or inputs like labor, raw materials, electricity, oil, and so forth take a shorter time to adjust to the production process.
• Fixed factors or inputs like machines, buildings, heavy equipment, or manufacturing plant capacities take longer period for their adjustments by the needs of production.
• True or False: Variable cost is not easy to increase or decrease such fixed inputs to suit business conditions.

  False: Fixed Cost
• True or False: Variable Cost can be increased or decreased to fit the requirements of production

  True