Short analysis of costs long run and short run

 

Term	Symbol		Equation	Definition
Fixed cost				Cost that is independent of the output level
Variable cost				Cost that varies with the output level
Total fixed cost	TFC			Cost of the fixed inputs (equals sum of quantity times unit price for each fixed input)
Total variable cost	TVC			Cost of the variable inputs (equals sum of quantity times unit price for each variable input)
Total cost	TC	TC=TFC+TVC		Cost of all inputs (equals fixed costs plus variable costs
Marginal cost	MC	MC=DTC¸DQ		Change in total cost resulting from a one-unit rise in output (Q) [equals the change in total cost divided by the change in output]
Average fixed cost	AFC	AFC=TFC¸Q		Total fixed cost per unit of output [equals total fixed cost divided by total output]
Average variable cost	AVC	AVC=TVC¸Q		Total variable cost per unit of output [equals total variable cost divided by total output[
Average total cost	ATC or	ATC=AFC+AVC		Total cost per unit of output [equals average fixed cost plus average variable cost]