Unit I: Costs of Production

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The costs of production include many parts, such as:

Fixed costs, or FC,  are costs that don't change no matter how much is produced. An example would be a mortgage.

Variable costs, or VC, are costs that rise or fall depending upon how much is produced. An example would be an electricity bill.

Total costs, or TC, are (fixed costs) + (variable costs).

Marginal revenue is the additional income of selling one more unit of a good.

Marginal costs, or MC, are the cost of producing one more unit of a good.

Total revenue is (price, P) x (quantity, Q).

We can find the average fixed cost (AFC), average variable cost (AVC), and average total cost (ATC) using the information above. Here are the formulas to find the different variables:

FC + VC = TC
TFC + TVC = TC
AFC + AVC = ATC
TFC/Q = AFC
TVC/Q = AVC
TC/Q = ATC
AFC x Q = TFC
AVC x Q = TVC
ATC x Q = TC
(new TC) - (old TC) = MC

Image result for costs of production table
For more information, refer to this page on Economics Online's website:

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