Theory of Costs — full notes
Economics · Microeconomics - Theory of Costs
Theory of Costs
1. Short-run cost categories
Total Fixed Cost (TFC) - does not change with output in the short run. Total Variable Cost (TVC) - changes with output. Total Cost (TC) = TFC + TVC. Average Fixed Cost (AFC) = TFC/Q. Average Variable Cost (AVC) = TVC/Q. Average Total Cost (ATC) = TC/Q (= AFC+AVC). Marginal Cost (MC) = change in TC from one more unit.