Explaining total cost, variable cost, fixed cost, marginal cost, and average total cost for Econ. 1

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How do you calculate Average Fixed Cost

One method is to divide total fixed cost by the number of units produced Another method is to find the difference between Average Total Cost and Average Variable Cost

What is TVC

TVC stands for Total Variable Cost

What happens to marginal cost curve when energy is a fixed cost and energy prices rise?

The Marginal Cost Curve is not affected if the variable cost do not change.

How is Average Variable Cost calculated

Total Variable Cost divided by the number of units produced is the Average Variable Cost

How is Average Total Cost Calculated

Total cost divided by the number of units produced is the Average Total Cost

How is Total Variable Cost calculated

Variable cost divided by the number of units produced is the Total Variable Cost

How is the cost of energy a fixed cost and a variable cost?

When energy is used to maintain fixed plant, equipment, etc... independent of the output produced it is a fixed cost. Since energy used to produce product goes up or down depending on the amount of product produced it is a variable

What happens to average total cost curves when energy is a fixed cost and energy prices rise?

When fixed costs increase so will average total costs. The ATC curve will shift upward

What is a fixed inputs

those inputs where quantities do not change when the quantity of output changes (the building, equipment, truck...)

How do you calculate Total Cost?

The sum of variable cost and fixed cost

What happens to Average Fixed Cost as output increases

AFC declines as output increases due to spreading effect. The fixed cost is spread over more and more units of outputs as output increases.

What is AFC

AFC stands for Average Fixed Cost

What is ATC

ATC stands for Average Total Cost

What happens to Average Variable Cost as output increases

AVC increases as output increases due to the diminishing returns affect. diminishing returns to labor cause costs to increase as additional units of output increase because it cost more.

How do you calculate Marginal Cost?

Change in Total Cost divided by quantity of product produced.

What is AVC

AVC stands for Average Variable Cost

How do you calculate Variable Cost?

Quantity of workers times cost of each worker plus Quantity of product produced times cost per unit produced.


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