Fixed and variable costs
Average total cost (ATC)
How much it costs to produce one unit of output ATC= TC/ Q ATC= AFC+AVC
Average fixed cost (AFC)
How much you are paying in fixed cost to produce one item AFC=TFC/Q
Average variable cost (AVC)
How much you are spending on labor to produce one item AVC=TVC/Q AVC= wage/APP
Marginal cost (MC)
The additional cost of producing one more unit of output MC=wage/ MPP
Variable costs
A cost whose amount does change according to output level Labor, supplies/inventory
Fixed costs
A cost whose amount does not change according to output level Rent, property taxes, payments on loans
Total fixed cost (TFC)
All of the fixed costs you are paying to produce output
Total variable costs (TVC)
All of the money you are paying for your labor force TVC= wage/ L
Total cost (TC)
All of the money you are spending to produce all of your output TC= TFC+ TVC