Question

Define and know how to calculate the following variables: fixed cost, variable costs, total cost, average...

Define and know how to calculate the following variables: fixed cost, variable costs, total cost, average fixed cost, average variable cost, average total cost, and marginal cost.

Total fixed cost;

The cost which is incurred once and it does not change with the change in the output or service in short-run is called fixed cost.

Total variable cost.

On the other hand, some costs increases with the increase in the output or services, these costs is known as the variable cost.

Total variable cost = sum of all variable cost.

Total cost is the sum of total variable cost and total fixed cost.

TC= fixed cost + Variable cost

Average variable cost is the average of the total variable cost and it is calculated with the following formula.

AVC= VC/Q

Marginal cost is the addition of the total cost due to producing an extra unit of output. This is calculated with the following formula.

MC= VCn- VCn-1

Average total cost is the average of the total cost and it is calculated with the following formula.

ATC=TC/Q

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