Components of Economic Costs
- Total cost (TC): Total Cost equal fixed cost plus variable costs. TC = FC + VC.
- Variable cost (VC): Variable costs are the costs paid to the variable input. Inputs include labor, capital, materials, power and land and buildings. Variable inputs are inputs whose use vary with output. Conventionally the variable input is assumed to be labor.
- Total variable cost (TVC) or (VC) total variable costs is the same as variable costs.
- Fixed cost (FC) fixed costs are the costs of the fixed assets those that do not vary with production.
- Total fixed cost (TFC) or (FC)
- Variable cost (VC): Variable costs are the costs paid to the variable input. Inputs include labor, capital, materials, power and land and buildings. Variable inputs are inputs whose use vary with output. Conventionally the variable input is assumed to be labor.
- Average cost (AC) average cost are total costs divided by output. AC = FC/q + VC/q
- Average fixed cost (AFC) = fixed costs divided by output. AFC = FC/q. The average fixed cost function continuously declines as production increases.
- Average variable cost (AVC) = variable costs divided by output. AVC = VC/q. The average variable cost curve is typically U-shaped. It lies below the average cost curve and generally has the same shape - the vertical distance between the average cost curve and average variable cost curve equals average fixed costs. The curve normally starts to the right of the y axis because with zero production
- Marginal cost (MC)
- Cost curves[[pt:Custo económic
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