Question

h) What is the difference between fixed costs and variable costs? What is the difference between accounting costs and economic costs? What is the differ - ence between private costs and external costs? Name all the categories that comprise economic costs. i) How do we determine the profit-maximizing level of production using analy - sis of total costs and total revenues? What is the rule for profit maximization using marginal analysis? What happens to economic profits in a perfectly competitive market in the long run? What is the difference between account - ing and economic profits? j)What is the perfectly competitive market equilibrium? Under what condi - tions are perfectly competitive markets economically efficient?

Answer 1

First question has been answered :

h) What is the difference between fixed costs and variable costs? What is the difference between accounting costs and economic costs? What is the difference between private costs and external costs? Name all the categories that comprise economic costs.

Answer : Fixed costs are independent of output , exist even at 0 level of output , cost of fixed factors , these costs found only in short run , they are supplementary cost .

Variable costs are those which vary with the level of output , cost of variable factors , costs become zero at zero level of output , exists both in short and long run , also called prime costs .

Accounting costs are only explicit costs . Economic costs are explicit + implicit ( opportunity ) costs .

Private costs are a producer's or supplier's cost of production . It includes internal costs incurred for inputs, labor, rent, and depreciation but excludes external costs .

External costs are costs imposed upon a third party when goods and services are produced and consumed between two parties . As for example pollution generated due to production that affects environment .

Economic costs are opportunity costs that might be included in variable costs which could have been invested else where , private costs , external costs .