Cost Part 2.pptx - Cost and Profit 1 Cost in the Short Run...

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1 Cost and Profit
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2 Cost in the Short Run Fixed costs do not change with changes in output Variable costs increase as output increases. Total cost of production equals the fixed cost plus the variable cost VC FC TC
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3 Cost in the Short Run Average Total Cost (ATC) is the cost per unit of output, or average fixed cost (AFC) plus average variable cost (AVC). This can be written: Q TVC Q TFC ATC Q TC or AVC AFC ATC
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4 Cost in the Short Run Marginal Cost ( MC ) is the cost of expanding output by one unit. Since fixed cost have no impact on marginal cost, it can be written as: Q TC MC
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5 The Various Measures of Cost: 1.10 2.10 1.50 1.20 0.30 12.00 3.00 15.00 10 1.90 1.43 1.10 0.33 9.90 3.00 12.90 9 1.70 1.38 1.00 0.38 8.00 3.00 11.00 8 1.50 1.33 0.90 0.43 6.30 3.00 9.30 7 1.30 1.30 0.80 0.50 4.80 3.00 7.80 6 1.30 0.70 0.60 3.50 3.00 6.50 5 0.90 1.35 0.60 0.75 2.40 3.00 5.40 4 0.70 1.50 0.50 1.00 1.50 3.00 4.50 3 0.50 1.90 0.40 1.50 0.80 3.00 3.80 2 0.30 3.30 0.30 3.00 0.30 3.00 3.30 1 --------- --------- --------- 0.00 3.00 3.00 0 Marginal Cost Average Total Cost Average Variable Cost Average Fixed Cost Variable Cost
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