the costs of a firm

• profit = total revenue - total costs
• economic costs include the monetary value of factors of production as well as the opportunity cost of production
• the short run is a period of time when at least one of a firm's factors of production is fixed
• the long run is a period of time when all factors of production can be varied
• fixed costs do not vary with output
• variable costs do change dependant on output
• total costs includes variable and fixed costs involved in producing a particular level of output
• average costs is the costs per unit produced
• average costs is produced by dividing total costs by the quantity produced
• marginal cost is the extra cost incurred as the result of producing one more unit of output
• marginal costs are only affected by variable costs
• the lowest average cost occurs when marginal costs equals to average costs

  
• when MC and AC intersects, this is the point of productive efficiency
• when MC is lower than AC, the AC curve will be falling
• when MC is greater than AC, the AC curve will be rising
• the AC curve is U-shaped as they both decrease until they reach a minimum and then begin to increase
• the MC curve is u-shaped as it decreases initially as output increases, then begins to increase in the short-run due to the law of diminishing return