Micro Unit 3.3 CW: The Costs of Production (MS)

The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, which might have been produced if resources had not been used to produce X.

If marginal cost lies below average variable cost, average variable cost must be falling.

At zero units of output a firm's variable costs are zero.

Average fixed costs diminish so long as output increases.

Variable costs may be defined as cost which vary directly with output.

The short run is a period of time during which all costs are fixed costs.

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

The law of diminishing marginal returns accounts for the fact that the long-run average cost curve is U-shaped.