Costs

fixed costs

costs that stay the same with output (rent, salaries, interest on loans)

variable costs

costs that change with output (raw materials, wages, utility bills)

total fixed cost

TC-TVC or AFC/Q

short run

At least one factor of production is fixed

long run

when all factors of production aren variableand firms can enter or exit the market freely.

marginal cost

change TC/changeQ a

average cost

TC/Q or AFC+AVC

increasing return to scale

percentage change of output is greater than percentage change input.

decreasing return to scale

percentage change of output is lower than percentage change input.

constant return to scale

percentage change of output is equal to percentage change of input.

concept of minimum efficient scale

lowest level of output where the curve stops decreasing which allows producers to fully exploit economies of scale.(After that point there are no more economies of scale.)