Microeconomics Cost, Revenue, and Profit Definitions

Terms of cost, revenue, and profits as they concern monopolies, monopolistic competition, and oligopolies

Average Toal Cost (ATC)

Total Cost (TC) divided by Quantity (Q)

Total Cost (TC)

Average Total Cost (ATC) times Quantity (Q); Fixed Cost plus Variable Cost

Marginal Cost (MC)

Derivative of Total Cost (TC)

Fixed Cost

The base cost of production (constant)

Variable Cost

The cost of production that changes by quantity

Total Profit (π)

Total Revenue (TR) minus Total Cost (TC)

Total Revenue (TR)

Price (P) times Quantity (Q)

Marginal Revenue (MR)

Derivative of Total Revenue (TR)

Profit maximizing Quantity (Q*)

When Marginal Cost (MC) equals Marginal Revenue (MR); When the derivative of Total Profit (π) is set to zero

Socially Optimum Quantity (Q social)

When Marginal Cost (MC) equals Price (P)

Price Markup

When the Price (P) at Q* is higher than the Marginal Cost (MC) at Q*

Consumer Surplus (CS)

Area between the Price (P) and the Demand curve