COSTS OF PRODUCTION

Costs of Production

Fixed Cost: A cost that doesn't change, no matter how much is produced.

Variable Cost: A cost that rises or falls depending upon how much is produced. 

• Ex. Electricity bills

Total Cost:   
Fixed Cost + Variable Cost = Total Cost (TC)

Marginal Revenue: The additional income from selling one more unit of a good

Marginal Cost: The cost of producing one more unit of a good.

Total Revenue:

Price ✕ Quantity = Total Revenue 

Formulas:

• TFC + TVC = TFC
  

• AFC + AVC = ATC
  

• TFC / Q = AFC
• AFC ✕  Q = TFC
  

• TVC / Q = AVC

• AVC ✕  Q = TVC
  

• TC /  Q = ATC