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Define cost of production
A firm’s expenditure in the process of producing goods and services
What are the 6 types of cost of production?
Fixed cost
Variable cost
Total cost
Average variable cost
Average fixed cost
Average total cost
Define fixed cost
Cost that a firm has to pay no matter how much it produces or sell
Define variable cost
Cost that changes as the level of output changes
Define total cost
The sum of all fixed costs and variable costs or production
> Total cost = fixed cost + variable cost
Define average fixed cost
Refers to a firm’s fixed costs per unit of output
> AFC = fixed cost / level of output
Define average variable cost
Refers to the variable cost per unit of output
> AVC = variable cost / output level
Define average total cost
The total cost per unit of output
> ATC = (total fixed cost + total variable cost) / output level
Define revenue
The income firm receives from the sale of goods and services
Define total revenue
The total amount of money received from sale of goods and services
> Total revenue = price x quantity sold
Define average revenue
The income firm receives from the sale of goods and services per unit
> Avg revenue = total revenue / quantity sold
What are 3 objectives of firms ?
Survival
Growth
Profit maximization
What is the formula to find profit?
Profit = total revenue - total cost
Note 
Flashcard (43)