Cost of Production and Concepts of Revenue — Flashcards
Gujarat Board · Class 11 · Economics
22 flashcards for Cost of Production and Concepts of Revenue (Gujarat Board Class 11 Economics) to test yourself on key terms and facts.
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What is Real Cost according to Marshall?
Answer
Real Cost refers to the psychological and physical burden faced by laborers, capitalists, and entrepreneurs in the production process. It includes fatigue, boredom, tension, stress, anxiety, and sacri…
Define Opportunity Cost with an example.
Answer
Opportunity Cost is the cost of the next best alternative foregone when making a choice. It's based on the fact that factors of production have alternative uses. Example: If a piece of land can produc…
What is the difference between Short Term and Long Term in economics?
Answer
Short Term: A period where certain factors of production (like plant, machinery, building) are fixed, and production can only be changed by varying variable factors (raw materials, labor, electricity)…
What is Fixed Cost? Give the formula and characteristics.
Answer
Fixed Cost is the cost that remains constant regardless of the level of production in the short run. It's also called overhead cost. Characteristics: (1) No relation with quantity of production (2) Re…
Explain Variable Cost with its characteristics.
Answer
Variable Cost is the cost incurred on variable factors that changes with the level of production. Characteristics: (1) Direct positive relationship with production (2) Zero when production is zero (3)…
What is the formula for Total Cost and its relationship with other costs?
Answer
Total Cost (TC) = Total Fixed Cost (TFC) + Total Variable Cost (TVC). Total Cost has a cause-effect relationship with production - higher production leads to higher total cost. The TC curve starts fro…
How do you calculate Average Fixed Cost? What happens to AFC as output increases?
Answer
Average Fixed Cost (AFC) = Total Fixed Cost (TFC) ÷ Total Production (TP). As output increases, AFC decreases because the same fixed cost is distributed among more units. Example: If TFC = ₹50,000 and…
What is Average Variable Cost and how does it behave?
Answer
Average Variable Cost (AVC) = Total Variable Cost (TVC) ÷ Total Production (TP). AVC initially decreases due to increasing returns to scale, reaches a minimum point, then increases due to decreasing r…
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