What is cost?
Cost is the Amount of money spends to produce goods.
Types of cost:
Average variable cost
Average fixed cost
Fixed Cost: Costs that don’t change based on production.
Variable Cost: Costs that change with rate of production.
Example: Cost of raw materials.
Total cost: Total economic cost of production consisting of fixed and variables costs.
Total costs= Fixed Costs + Variable Costs.
Marginal Costs: Marginal cost is the addition to the total cost on account of producing one additional unit of product.
MC=Change in TC/Change in Q.
Average Costs: Average cost is not actual cost. It is obtained by dividing the total cost by the total output.
Average Variable Costs: Average Variable Costs is the addition to the total variable cost per unit of production.