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What are total cost of production examples?
In a perfectly competitive market, all n firms are equal. Thus, the market total cost is the total cost (TC) of one firm multiplied by the amount of n firms in the market Total Market Cost =Variable Costs and fixed costs ...Fixed costs plus variable costs.
Who own the factor of production?
Business firms own the factors of production.
Why do firms want to know their average total cost?
Average total cost determines how much profit or loss a firm will make at a certain output and price. It also determines is a firm should shut down, temporarily stopping production (not covering variable costs) but keeping the business (covering fixed costs), or if it should exit the market (not covering variable or fixed costs).
What will happen to profits and output levels when variable costs rise in a perfectly competitive industry?
When variable costs rise in a perfectly competitive industry, profits will decrease and output levels may decrease as well. This is because higher variable costs reduce the profit margins for firms, leading to lower overall profits. In response, firms may reduce their output levels to maintain profitability.
The government must go to business firms to buy resources for production.?
false A+ users ^^
What are total cost of production examples?
In a perfectly competitive market, all n firms are equal. Thus, the market total cost is the total cost (TC) of one firm multiplied by the amount of n firms in the market Total Market Cost =Variable Costs and fixed costs ...Fixed costs plus variable costs.
Who own the factor of production?
Business firms own the factors of production.
Why do firms want to know their average total cost?
Average total cost determines how much profit or loss a firm will make at a certain output and price. It also determines is a firm should shut down, temporarily stopping production (not covering variable costs) but keeping the business (covering fixed costs), or if it should exit the market (not covering variable or fixed costs).
What are examples of total costs?
In a perfectly competitive market, all n firms are equal. Thus, the market total cost is the total cost (TC) of one firm multiplied by the amount of n firms in the market Total Market Cost =Variable Costs and fixed costs ...Fixed costs plus variable costs.
What will happen to profits and output levels when variable costs rise in a perfectly competitive industry?
When variable costs rise in a perfectly competitive industry, profits will decrease and output levels may decrease as well. This is because higher variable costs reduce the profit margins for firms, leading to lower overall profits. In response, firms may reduce their output levels to maintain profitability.
Are firms with a high degree of operating leverage trading off higher fixed costs for lower per-unit variable costs?
Yes, firms with a high degree of operating leverage typically trade off higher fixed costs for lower per-unit variable costs. This means that they incur significant fixed expenses, such as rent and salaries, which need to be covered regardless of production levels. In return, their variable costs per unit are lower, allowing for potentially higher profit margins once they exceed the breakeven point. However, this also increases risk, as a decline in sales can lead to proportionately larger losses.
What is the relationship between atc AFC and avc?
Average Total Cost (ATC), Average Fixed Cost (AFC), and Average Variable Cost (AVC) are key components in cost analysis for firms. ATC is the sum of AFC and AVC, which means ATC represents the total cost per unit of output. AFC decreases as production increases because fixed costs are spread over more units, while AVC reflects the variable costs associated with producing each unit. Understanding the relationship among these costs helps firms optimize pricing and production strategies.
How is CVP impacted by changes in fixed and variable costs?
A change in variable cost affects the contribution margin ratio. A change in fixed cost affects the break-even point . An increase in these costs affect the firms profit.
Firms with a high degree of operating leverage are?
Have a high amount of fixed costs relative to their variable costs. DOL= CM / Net Income We derive CM by the eqaution of Selling Price - Variable Costs If a firm has high variable costs relative to their selling price then they will have a small CM and therefore their DOL will decrease. Have a high amount of fixed costs relative to their variable costs. DOL= CM / Net Income We derive CM by the eqaution of Selling Price - Variable Costs If a firm has high variable costs relative to their selling price then they will have a small CM and therefore their DOL will decrease.
The government must go to business firms to buy resources for production.?
false A+ users ^^
If variable labor costs decline other things are held constant how will this effect a firms breakeven point?
breakeven point will decrease
How is a perfectly competitive firms marginal cost curve related to its supply curve?
a perfectly competitive firms supply curve will be the portion of the marginal cost curve which lies above the average variable cost curve (AVC)..this will be due to the firms unwillingness to supply below the price in which they could cover their variable costs
