a) Costs

a) formulae to calculate and understand the relationship between: total cost, total fixed cost, total variable cost, average (total) cost, average fixed cost, average variable cost, marginal cost

total cost = cost of producing all output

• TC = TFC + TVC

average total cost = cost of producing one unit of output

• ATC = TC/Q

marginal cost = the cost of producing one additional unit of output

• MC = ΔTC/ΔQ

fixed cost = cost that does not change depending on the level of output

total fixed cost = fixed cost of producing all output

• TFC = AFC × Q

average fixed cost = fixed cost of producing one unit of output

• AFC = TFC/Q

variable cost = cost that changes depending on the level of output

total variable cost = the variable cost of producing all output

• TVC = AVC × Q

average variable cost = variable cost of producing one unit of output

• AVC = TVC/Q