The monetary value of inputs that are needed to produce a particular good or service
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What are fixed costs?
Costs that are independent of output produced e.g. rent, interest paid on loans
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What are variable costs?
Costs that vary directly with output produced e.g. labour, fuel, raw material costs
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What is the total cost?
The total cost of production or provision of a service
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What is the equation for total cost?
Total cost = Fixed cost + Variable cost
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Nature of costs in most types of transport is that _____ costs are a relatively high proportion of total costs. Particularly true of air and rail transport.
Fixed
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In air transport, a substantial fixed cost item is the annual sum that has to be paid to?
Lease aircraft
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Where aircraft are owned by the airline, this is the cost of what?
Any loaned finance and also depreciation
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What is average cost and the equation?
Average cost is the unit cost of production. Average cost = Total cost/quantity
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What is marginal cost?
Marginal cost is the change in total cost that occurs when output is changed by one unit.
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What is short run?
Time period when a firm is unable to change factors of production except for one, usually labour.
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What is long run?
Time period when all factor inputs can be changed
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The lowest level of output where LRAC is minimised is known as what?
Minimum efficiency scale
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Other cards in this set
Card 2
Front
What are fixed costs?
Back
Costs that are independent of output produced e.g. rent, interest paid on loans
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