EC120 Lecture Notes - Lecture 13: Opportunity Cost, Fixed Cost, Savings Account
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Fixed costs (fc) costs that do not vary with the quantity of output produced. They are incurred even when the firm produces nothing at all. Variable costs (vc) costs that do vary with the quantity of output produced. Ex: expenses such as raw materials, goods, salaries, etc . Total cost (tc) the sum of the fixed and variable costs: tc = vc + fc. The cost is something you give up to get it. Recall that the opportunity cost of production, they include all the opportunity costs of making its output of goods and services. When economists speak of a firm"s cost of production, they include all the opportunity costs of making its output of goods and services. Explicit costs: input costs that require an outlay of money by the firm. Implicit costs: input costs that do not require an outlay of money by the firm. The cost of capital as an opportunity cost: