Classification of Costs

1. Costs are usually measured in money and include such things as wages, rent, rates, interest, and the amounts of money paid for raw materials, fuel power, transport, etc. In general, economists define the following types of costs. Fixed costs are costs which do not vary when output varies. They are associated with the fixed factors of production, and include such things as interest payment on loans and bonds, insurance premiums, local and state property taxes, rent payments, executive salaries and depreciation. Variable costs are costs which are related directly to output. The most obvious items of variable costs are the wages labor, the costs of raw materials, and fuel and power. Variable costs are often described as direct or prime costs.

2. Total costs include fixed and variable costs. When output is zero, total costs will be equal to fixed costs since variable costs will be zero. When production commences, total costs will begin rise as production increases, because there must be some increase in variable costs as output expands. Average costs (or costs per unit) are equal to total costs. When output is small, average costs will be spread over a small number of units of output. As output increases, average cost will tend to fall as each unit has a smaller element of fixed costs.

3. Marginal costs are extra costs from producing one more unit of output. Marginal costs are an increase in variable costs because fixed costs do not change. Marginal costs allow the business to determine the profitability of increasing or decreasing production by a few units.

depreciation – амортизация, изнашивание; обесценивание, снижение стоимости.

6. Определите, являются ли приведенные ниже утверждения (1, 2, 3)

а) истинными (true)

б) ложными (false)

в) в тексте нет информации (no information)

1) Average costs are not equal to total costs.

2) As fixed costs do not change marginal costs are an increase in variable costs.

3) Cars’ value usually depreciates by about $1000 in the first year.

7. Прочитайте абзац 3 и ответьте письменно на следующий вопрос:

Do marginal costs determine the profitability of increasing or decreasing production by a few units?

Федеральное государственное образовательное

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«Финансовый университет

ПРИ ПРАВИТЕЛЬСТВЕ РОССИЙСКОЙ ФЕДЕРАЦИИ»

ЗАОЧНЫЙ ФИНАНСОВО-ЭКОНОМИЧЕСКИЙ ИНСТИТУТ

Кафедра иностранных языков и межкультурной коммуникации

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Москва 2012

1 Commonwealth of Independent States (CIS)- Содружество независимых государств

2 Gross Domestic Product (GDP)- валовой внутренний продукт

 high seas – море за пределом территориальных вод

3 Fed (Federal Reserve System) - Федеральная резервная система

4 Deteriorate - ухудшать; портить; повреждать

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