Total cost

A cost is what a firm, an individual or society pays to produce or consume goods and services, it is the consumption of resources such as labour time, capital, materials, fuels, etc. In economics, all resources are valued at their opportunity cost, which is the value of the alternative use of the resources. Costs are defined in a variety of ways and under a variety of assumptions that affect their value. The opposite of a cost is a benefit and often both are considered together, for example, net cost is the difference between gross costs and benefits.[1]

Total Cost

The total cost is the sum of fixed costs and variable costs.[2]

For example, if a firm has a fixed cost of $30 per unit and a variable cost of $5 per unit as they increase their output, the total cost will be $35.

Average Total Cost

The average total cost (AFC) is simply the total cost divided by the quantity produced showing the total cost per-unit.

ATC= [math]\frac{TC}{Q}[/math]

See Also

References

  1. A. Verbruggen, W. Moomaw and J. Nyboer. Glossary of terms used in the: Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN). [Onlince], Available: http://www.ipcc.ch/publications_and_data/publications_and_data_glossary.shtml [May.29, 2016]
  2. A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 270.

Authors and Editors

Haydon Armstrong, Jason Donev
Last updated: April 14, 2018
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