Costs of Production

Inputs of Labor

number of workers used (W or L)

Total Product

type of output, number of units of a product produced during specific time period (TP)

Marginal Product

the additional number of units produced when there is one more worker (MP)

Average Product

average number of units produced per worker (AP)

Output

number of units produced

Total Fixed Cost (TFC)

the total costs that exist regardless of how much is being produced

ex: rent of a building, insurance, salaries in contract

Total Variable Cost (TVC)

the total costs that change regardless of how much is being produced

ex: raw materials, energy/utilities, hourly wages

Total Cost (TC)

TFC + TVC

Average Fixed Cost (AFC)

TFC/number of units produced

Average Variable Costs (AVC)

TVC/number of units produced

Average Total Cost (ATC)

TC/number of units produced

Marginal Cost (MC)

TC-previous TC