Microeconomics Cost Concepts

Flashcards covering key vocabulary and concepts related to costs in microeconomics.

Fixed Costs (FC)

Costs that do not vary with the quantity of output produced.

Variable Costs (VC)

Costs that vary with the quantity of output produced.

Total Costs (TC)

The sum of fixed costs and variable costs.

Average Fixed Costs (AFC)

Total fixed costs divided by the quantity of output: AFC = FC/Q.

Average Variable Costs (AVC)

Total variable costs divided by the quantity of output: AVC = VC/Q.

Average Total Costs (ATC)

Total costs divided by the quantity of output: ATC = TC/Q, ATC = AFC + AVC.

Marginal Cost (MC)

The change in total cost from producing one more unit.

Economies of Scale

Cost advantages that firms experience as their output increases, leading to a decrease in average cost.

Diseconomies of Scale

Cost disadvantages that firms face as their output increases, resulting in an increase in average cost.

Constant Returns to Scale

The situation in which output increases in direct proportion to an increase in inputs, keeping average costs constant.