Ch16 - Business costs, revenues and profit

• Fixed cost (FC)


  Costs that do not vary with level of output
• Fixed costs


  • rent
  • business rates
  • R&D costs
• Variable cost (VC)


  Costs that change when level of output change
• Variable costs


  • raw materials
  • fuels
  • labour
• Total cost (TC)


  Cost of firm of producing all output over a period = fixed cost + variable cost
• Average cost


  Total cost (TC) / Quantity produced
• Profit


  Total Revenue - Total Cost
• Average cost is U-shaped

  A) lowest point, optimum level

  
• Total revenue 


  Price x Quantity