MGCR 293 Study Guide - Final Guide: Variable Cost, Cost Curve, Diminishing Returns

• School: McGill University
• Department: Management Core
• Course: MGCR 293
• Professor: Kamal Salmasi

Document Summary

Ac = ar --> helps decide whether to operate in sr or lr. Opportunity cost: the costs of inputs to a rm are their values in their most valuable alternative uses. Historical cost: amount actually paid for a particular input. Explicit cost: ordinary items that an accountant would include as the rm"s expenses. Raw materials, storage, production costs, marketing costs, distribution costs, communication and utility costs. Implicit cost: opportunity costs of resources owned and used by the rm"s owner. Lost revenue from occupying the production building instead of renting it out. Economic cost: sum of explicit cost plus implicit cost. Fixed cost: does not depend on the rm"s level of output. Cost incurred even if the rm is producing nothing and cannot be recovered. Variable cost: depends on the level of production chosen. Short run: - cannot change quantity of some of its inputs. Firm decides how much output to produce in the current facility.