6. Prices are determined by cost in all market structure
7.
8.
9.
10.
11. The concept of opportunity cost is useful for manager in decision making.
12.
13. Sunk costs are those costs which are incurred in the past or that have to be incurred in the future as result of a contractual agreement.
14.
15. Historical cost of an asset states the cost of plant, equipment and materials at the price paid originally for them, while the replacement cost states the cost that the from would have to incur if it wants to replace or acquire the same assets now.
16.
17. All the explicit costs like payment of rent, wages, salaries, interest, transport charges, etc., fall in the category of out-of-pocket costs.
18.
19. Those costs whose postponement does not affect (at least for some time) the operational efficiency of the firm, are: known as postponable costs, e.g., the maintenance of building, renovation of office etc.
20.
21. They are associated with the existence of a firm's plant and, therefore, must be paid even if the firm's level of output is zero.
27. Long run cost is one that is incurred by the firm in the long run.
28.
29. If the decision of a firm to expand its output leads to increase in its costs, this cost will be known as private costs.
30. Social costs, on the other hand, are the total costs to the society or account of production of a good
31.
32. Costs which can be conveniently associated wholly with a particular unit of a final product.
33. Indirect cost means that cost which cannot be allocated but which can be absorbed by , cost unit.
34.
35. Implicit costs are the value of forgone opportunities that does not involve a physical cash payment.
36.
37. It indicates the functional relationship between total cost and total output.
38. If C represents total cost and Q represents the level of output, then the cost function is represented as C = f(Q)
39. It shows that the total cost of the firm depends on the output to be produced.
40.
41. With a particular change in production output, the change in total, average and marginal costs can be determined for a given set of cost functions for a firm.
42. The short run average total costs (SRATC) and average variable costs (AVC) are slightly U-shaped.
43.
44. Marginal costs of nth unit(MCn) is the difference between the total costs of nth unit(TCn) and total costs of (n-1)th unit (TCn-1) i.e., MCn= (TCn-TCn-1) Total costs increases through out at different rates. Average and marginal costs first decline and then rises. Marginal costs rises earlier than average costs.
45. COST OF PRODUCTION Cost analysis plays a very dominant role in managerial economics as it is very much related to the fixation of price. Determinants of Cost: Size of plant Level of production Nature of technology Process of various Inputs Managerial & labour efficiency
