ECON 1001 Lecture Notes - Lecture 5: Fixed Cost, Variable Cost, Indian Railways

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rubyllama377

27 Mar 2018

School

Department

Economics

Course

ECON 1001

Professor

Erhardt

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Document Summary

The expenditure incurred by a firm on factor as well as non-factor inputs (for the production of the commodity is called cost of production. The functional relationship between cost and output is called cost function. Money cost: expenses incurred in the form of money is called money cost. Real cost: it refers to the pain, discomfort the disability involved in supplying the factors of production. Explicit cost- it is the money expenses incurred on hired factors of production or it is the payment made to outsiders for providing services. For e. g. wages to the workers interest on loans etc. Implicit cost- it is the cost of self employed services or self owned resources. This is applicable to small scale production units. For e. g. rent on the land owned by the producer himself, wages for his own labour, interest on his own capital etc. The 2 types of cost in the short run.

Related Questions

21) The choices listed below involve costs to the firm. For which is the implicit cost potentially different than its explicit cost? A) The use of firm-owned assets. B) The services of hired workers. C) The use of rented land. D) The interest paid on borrowed money. E) The purchase of raw materials used in production.

6) The choices listed below involve costs to the firm. For which is the implicit cost potentially different than its explicit cost? A) The use of firm-owned assets. B) The services of hired workers. C) The use of rented land. D) The interest paid on borrowed money. E) The purchase of raw materials used in production.

5. Economic profit is equal to

a. total revenue minus the explicit cost of producing goods and services.

b. total revenue minus the opportunity cost of producing goods and services.

c. total revenue minus the accounting cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

6. Accounting profit is equal to

a. marginal revenue minus marginal cost.

b. total revenue minus the explicit cost of producing goods and services.

c. total revenue minus the opportunity cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

7. Economic profit

a. will never exceed the accounting profit.