A Cost of Aggregation Is That

question 154

Multiple Choice

A cost of aggregation is that:

• A)details about individual households and firms are lost.
• B)the "big picture" cannot be studied.
• C)economy-wide totals cannot be obtained.
• D)broad economic trends are obscured.

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Definitions:

Long-Run Average Total Cost

The cost per unit of output incurred when all factors of production, including capital, are variable, indicating the lowest possible cost of production for each level of output when the scale of operation is changed.

Total Variable Cost

The sum of all costs that vary directly with the level of production or output, including costs for materials, labor, and energy.

Marginal Cost

The extra financial burden of producing an additional unit of a product or service.

Average Variable Cost

The cost per unit of output that varies with the level of production, excluding any fixed costs.