Chapter 8

  1. When determining profit of a medical firm, accountants consider the ___
    explicit costs
  2. these are input costs that require direct outlay of money by the medical firm
    Explicit costs
  3. **note**
    • Examples of explicit cost:
    • wage payments to medical staff
    • medical supply expenses
  4. when determining the profit, economists consider ___
    explicit and implicit costs
  5. these are inputs that do not require a direct outlay of money by a firm
    Implicit costs
  6. it is the amount lost by not using the resources in its best alternative use
    opportunity cost
  7. when making economic decisions, economists take into consideration of the ___
    opportunity cost
  8. it refers to the expenses plus depreciation charges for the capital
    accounting cost
  9. these are costs to a firm utilizing resources in production
    economic costs
  10. It is the difference between economic costs and accounting costs
    opportunity cost
  11. these are costs which are not taken into consideration and should not influence the economic decision
    sunken costs
  12. the expenditure that has been made and cannot be recovered
    sunken costs
  13. it is always required to produce any goods or services
  14. it is a time horizon over which the quantity of at least one factor input used in the production process is fixed
  15. it relates to he quantity of output to the cost of production
    cost theory
  16. types of short-run costs
    • total fixed costs
    • total variable costs
    • total costs
    • marginal costs
    • average fixed costs
    • average variable costs
    • average total costs
  17. these are the costs of production that does not vary with the level of output
    total fixed costs
  18. the costs paid by a firm in the business regardless of the total output
    total fixed costs
  19. it is the only way to eliminate fixed costs
    going out of business
  20. example of total fixed costs
    • depreciation of buildings and machinery
    • insurance premiums
    • leasing and rental expenses
    • purchases of land and equipment
    • interest payments on borrowed capital
  21. these are costs that vary with ouput
    total variable costs
  22. examples of total variable costs(operating expenses)
    • light
    • water
    • fuel
    • payment for raw materials
    • tax payments
    • wages
  23. it is the sum of fixed costs and varible costs at each output level
    total costs
  24. it is the way various measures of cost vary with the production level
    cost structure
  25. these are additional costs incurred from producing one additional unit of output
    marginal costs
  26. it refers to the changes in total costs divided by the change in output produced
    marginal cost
  27. it is the total fixed cost divided bthe number of units produced
    average fixed costs
  28. it is the total variable costs divided by the number of units produced
    average variable costs
  29. it is the total of all fixed and variable costs divided by the number of units produced
    average total costs
  30. it is the area between the total cost curveand the total variable curve
    total fixed cost curve
  31. it is a time period in which all inputs in production process are variable
  32. it is always the lowest point f the short-run average total cost producing that output
    long-run average total cost
  33. it is the curve tangent to each short run average cost
    long-run average total cost
  34. refers to the notion that average costs fall as a medical firm gets physically larger due to specialization of labor and capital
    long-run economies of scale
  35. it is when a percentage increase in all factor inputs leads to a greater percentage in otput
    increasing return to scale
  36. it exists when the average cost of production increases with the level of output
    diseconomies of scale
  37. it depicts the economies of scale
    downward sloping
  38. it depicts the diseconomies of scale
  39. it occurs when a percentage increase in allfactorinputs leads to a less than proportional increase in output
    decresing return to scale
  40. it exists when a percentage increase in all factor inputs leads to a proportionally equal increase in input
    constant return to scale
  41. it measure the changes in long-run total cost from a given change in output
    long-run marginal cost
  42. it refers to the difference between total revenue and explicit cost
    business profit
  43. it is the difference between the total revenue and  both explicit and implicit costs
    economic profit
  44. equals total revenue less total cost
  45. it is equal t price multiplied by quantity
    total revenue
  46. TR > TC
  47. TR < TC
  48. TR = TC
  49. price is greater than average total cost (P > ATC)
    Profit is greater than cost
  50. Price is equal to average total cost  (P = ATC)
    Profit is zero
Card Set
Chapter 8
Measuring costs in Health and Health Care Sector