CHAPTER 5: COST
1. Long run and short run cost
1. Short run cost is made up of factors of productions that can
increase or decrease in a very short time – eg labour, material
cost, utilities eg electricity etc. Variable according the flow of the
businesses. These cost are also called variable cost.
2. Long run cost – cost that cannot be varied in the short run and is
fixed during the short run. Eg. Factory, machinery , managerial
cost etc. Most often long run cost are fixed cost.
Total of a firm = Total Fixed cost + Total Variable Cost
3. The short run - law of diminishing marginal returns
- Total product
- Average product , Marginal product curves
1. Economic definition of cost
Total Cost = Total Fixed cost + total variable cost.
2. Fixed and variable cost
Total cost consist of fixed cost and variable cost.
1. Long run and short run cost
1. Short run cost is made up of factors of productions that can
increase or decrease in a very short time – eg labour, material
cost, utilities eg electricity etc. Variable according the flow of the
businesses. These cost are also called variable cost.
2. Long run cost – cost that cannot be varied in the short run and is
fixed during the short run. Eg. Factory, machinery , managerial
cost etc. Most often long run cost are fixed cost.
Total of a firm = Total Fixed cost + Total Variable Cost
3. The short run - law of diminishing marginal returns
- Total product
- Average product , Marginal product curves
1. Economic definition of cost
Total Cost = Total Fixed cost + total variable cost.
2. Fixed and variable cost
Total cost consist of fixed cost and variable cost.
