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Costs Introduction (3)

The document provides a table for calculating various cost metrics related to production, including Total Fixed Cost, Total Variable Cost, Total Cost, Average Cost, and Marginal Cost. It includes instructions for plotting these costs against output on diagrams. Additionally, it defines key cost concepts such as fixed costs, variable costs, and the relationships between total, average, and marginal costs.

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cedric.clarysse320
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5 views

Costs Introduction (3)

The document provides a table for calculating various cost metrics related to production, including Total Fixed Cost, Total Variable Cost, Total Cost, Average Cost, and Marginal Cost. It includes instructions for plotting these costs against output on diagrams. Additionally, it defines key cost concepts such as fixed costs, variable costs, and the relationships between total, average, and marginal costs.

Uploaded by

cedric.clarysse320
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Costs

1) Complete the table below.

Output Total Total Total Average Average Average Marginal


(Q) Fixed Variable Cost (TC) Fixed Cost Variable Cost (AC) Cost (MC)
Cost (FC) Cost (VC) (AFC) Cost
(AVC)
0 12 0 n/a n/a n/a n/a

1 10

2 16

3 21

4 28

5 40

6 60

7 91

2) On a big diagram, plot Total Fixed Cost (TFC), Total Variable Cost (TVC) and Total Cost (TC) against
Output (Q).

3) On a big diagram, plot Average Fixed Cost (AFC), Average Variable Cost (AVC) and Average Cost
(AC) against Output (Q).

4) On a big diagram, plot Average Cost (AC) and Marginal Cost (MC) against output (Q).

(Plot Marginal Cost at mid-points)


Equations

Fixed costs = costs that do not vary with output

Variable costs = costs that do vary with output

TC = TFC + TVC

Total costs is the sum of total fixed costs and total variable costs

AC = TC/Q

(AC = AFC + AVC)

Average cost is cost per unit of output

AFC = TFC/Q (fixed cost per unit of output)

AVC = TVC/Q (variable cost per unit of output)

MC = additional cost from producing one more unit of output

MC = ∆TC/∆Q = ∆TVC/∆Q

(N.B. If you are measuring the marginal cost from 2 to 3 units of output, you are actually measuring
the marginal cost at 2.5)

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