Dialogue No 2 (272 words)

Margaret Johnson, a young Sales Assistant, is speaking to William Harrison, a Marketing Manager.

MARGARET: Excuse me, can you tell me what is the main factor that affects the supply of goods?

WILLIAM'- Well, to my mind it's the cost of production. You see production costs are generally divided into fixed costs, variable costs, and total costs.

MARGARET: I see, and what is the difference between fixed and variable costs?

WILLIAM'- Fixed costs include interest payments on loans and bonds, insurance premiums, local and state property taxes, rent payments, and executive salaries. Fixed costs do not depend on quantity of production and they do not change as output changes. As for variable costs they change according to the quantity of production, they are usually associated with cost of labour and raw materials.

MARGARET: That's clear. And what is meant by total fixed costs?

WILLIAM'- Oh, that's the money, which is spent on the day-to-day running of a company and it is usually called overheads.

MARGARET: Is it the same as total costs?

WILLIAM: No, of course not. The total costs are the sum of fixed and variable costs of production. But at zero output, a firm's total costs are equal to its fixed costs. Then as production increases, so do the total costs as the increasing variable costs are added to the fixed costs.

MARGARET: By the way, do you know how per unit production cost is calculated?

WILLIAM: That's easy. You should take the sum of total costs of production and divide it by the total units produced. In this way you get the unit cost.

MARGARET: Thank you very much for explaining these basic points.

WILLIAM: You are welcome. I am always ready to answer any questions, concerning pricing policy and marketing strategies.

10* Listen to Dialogue No 2 between two speakers and say if the statements below are true or false. Then listen again and check your answers.

1. Production costs are the expenses a manufacturer has to pay for labour.

2. The amount of money necessary to produce one individual example of a product is the unit cost.

3. Variable costs do not depend on the changes in the output of production.

4. The day-to-day costs of running a business are called overheads.

5. Fixed costs are usually associated with cost of labour and cost of sales.

Unit3. READING COMPREHENSION

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Listen to Dialogue No 1 between two speakers and answer the questions below. Then listen again and check your answers.	\|	DEMAND, SUPPLY AND MARKET EQUILIBRIUM

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