Economic Costs

 

Definition of Economic costs

· Fixed Costs: These are fixed costs that do not vary with
output. E.g. cost of building a factory

· Variable Costs: These are costs that do vary with output
E.g. electricity, raw materials

· Total Costs: Fixed + variable costs

· Marginal Cost: This is the cost of producing an extra unit

· Sunk Costs: These are costs that are not recoverable e.g. advertising

Average Costs

· Average Total Cost (ATC) = TC / Q
· Average Variable Cost (AVC) = VC / Q
· Average Foxed Costs (AFC) = FC / Q

Essays and Revision Notes on Costs, Revenue and Profit

• Costs
• Diminishing Returns
• Diseconomies of Scale
• Economies of Scale
• Objectives of Firms
• Profit and Revenue