Understanding Economic Costs and Production Curves

Total Cost

Cost of all production factors used by a firm.

Average Cost

Total cost per unit of output produced.

Marginal Cost

Change in total cost from one additional unit.

Fixed Costs

Costs that do not change in the short run.

Variable Costs

Costs that vary with the level of output.

Short Run

Period where some resources are fixed.

Long Run

Period allowing all resources to be varied.

Average Fixed Costs

Fixed costs divided by quantity of output.

Average Variable Costs

Variable costs divided by quantity of output.

Average Total Costs

Total costs divided by quantity of output.

Economies of Scale

Output increases more than input increases.

Diseconomies of Scale

Output increases less than input increases.

Constant Returns to Scale

Output increases equal to input increases.

Economies of Scope

Joint production of products is cheaper.

Diseconomies of Scope

Separate production of products is cheaper.

Total Variable Costs

Costs of variable production factors used.

Total Fixed Costs

Costs of fixed production factors used.

Long-Run ATC Curve

Shows average total costs over long run.

Marginal Product

Change in output from a change in input.

Total Cost Curve

Graph showing total costs at various outputs.

Average Cost Curve

Graph depicting average costs at various outputs.

Marginal Cost Curve

Graph showing marginal costs at various outputs.

Cost of Production

Total expenses incurred in producing goods.

Short Run Costs

Costs incurred when some resources are fixed.

Long Run Costs

Costs incurred when all resources can change.