Firm Costs and Production Concepts

What are the three main types of firm costs of production?

• Total Cost (TC)

• Total Fixed Cost (TFC)

• Total Variable Cost (TVC)

What is the relationship between production and costs?

What is Marginal Cost (MC), and how is it calculated?

• MC is the cost of producing one additional unit. Formula: MC = ΔTC / ΔQ.

• MC is the total cost divided by the number of units produced.

• MC is the average cost of production.

How do marginal costs relate to average costs?

Define Total Cost (TC).

• TC is the sum of total fixed costs and total variable costs. Formula: TC = TFC + TVC.

• TC is the total revenue minus total costs.

• TC is the cost of producing one unit.

Define and calculate Average Total Cost (ATC).

• ATC is the cost per unit of output. Formula: ATC = TC / Q.

• ATC is the total cost divided by the number of units produced.

• ATC is the average fixed cost.

What is specialization, and how does it benefit production?

What are diminishing returns to production?

What is the profit-maximizing rule for firms?

What is the main difference between the short run and long run in production?