Costs and revenues

The total costs (TC) of production

The sum of all the costs of producing a given level of output over a period of time

Average cost (AC) / average total cost (ATC) of production

The average cost per unit of production

Marginal cost (MC) of production

The cost of producing an extra unit

What are the two types of costs can be classified into?

1) Variable costs

2) Fixed costs

What are variable costs?

Costs that change as output changes

What are fixed costs?

Costs that stay the same as the level of production increases

What can total and average costs be divided into?

Fixed and variable components

Total fixed costs (TFC)

The sum of all the fixed costs

What happens to total fixed costs when the level of production changes?

Remain constant

Total variable costs (TVC)

The sum of all variable costs

What happens to total variable costs when the level of production increases?

Total variable costs also increase

Average fixed costs (AVC)

Total fixed costs divided by output

Total fixed costs and total variable costs add up to

Total costs

Average fixed costs and average variable costs add up to

Average cost for any given level of production

Costs in the long run are

All variable

Costs in the short run are

Both fixed and variable costs