a cost that doesn't change with an increase or decrease in the number of goods and services produced and sold
variable cost
a cost that does change with an increase or decrease in the number of goods and services produced and sold
total cost
the cost of producing a given level of output
fixed costs + variable costs
average fixed cost
total fixed costs/output
mean fixed cost of producing the good
average variable cost
total variable cost/output
mean variable cost of producing the good
marginal cost
cost added by producing one additional unit of a product or service
cost curves
cost curves
average fixed cost curve (AFC)
starts high as the whole fixed costs are being divided by a small output, as output increases AFC falls as the same amount is divided by a larger number
average total cost curve (AC/ATC)
U-shaped due to law of diminishing marginal productivity
average total cost curve (AVC)
u-shaped but gets closer to ATC as output increases since AFC gets smaller
marginal cost (MC)
u-shaped due to law of diminishing marginal productivity
short run average total cost
total costs/output
total cost of producing a good within a period of time in which at least one factor of production is fixed
long run average cost
total cost/output
total cost of producing the good within a period of time in which all factors of production are variable
