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Production Costs

Fixed cost

Do not of quantity of

output

Variable cost

Vary with quantity of

output

GENERAL FORMULAS

Implicit cost : Costs that do not require money outlay Ex, time and effort Explicit cost = Costs that require money outlay Ex . wage, rent , lease Law of supply: Firms increase output when price rice

Total revenue: Firms return from sale of outputs

Total cost : Amounts paid for inputs and making output

Profit : TR - TC

Production cost = Total opportunity cost (includes implicit and explicit costs)

Production function =Relationship between quantities of inputs and outputs

Cost curve = Relationship between Quantity produced and total cost

Economic profit = Total revenue – Total cost(implicit + Explicit cost)

Accounting profit = Total revenue – Explicit cost

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Profit = TR - TC

TC = TFC + TVC

ATC = AFC + AVC

ATC = TC/Q

AVC = VC/Q

AFC = FC/Q

TC = Total cost

TFC = Total fixed cost

TVC = Total variable cost

ATC = Average total cost

AFC = Average fixed cost

AVC = Average variable cost

TC = Total cost

Q = Quantity

AVC = Average variable cost

VC = Variable cost

Q = Quantity

AFC = Average fixed cost

FC = Fixed cost

Q = Quantity

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