Answer
a. Opportunity costs
b. Average total costs
c. A fixed cost
d. Variable cost
e. Total cost
f. Marginal cost
Work Step by Step
a. Opportunity costs are included in the economic accounting of profits, as such costs affect the firm's production decisions. So whatever you give up for taking some action is called the opportunity cost.
b. This relationship between the two curves is exhibited in the graphs as well.
c. A fixed cost is a cost that HAS to be incurred, regardless of whether production occurs or not.
d. The cost of cream and sugar is the variable cost, and will fluctuate depending on whether the firm decides to boost production or not. The cost of the factory, however, is a one-time investment, and is fixed.
e. The excess of the revenue over the costs is the profit.
f. Marginal costs are the increase in total costs arising from an extra unit of production.
