Short-Run Production Costs
Introduced| English | Meaning |
|---|---|
| variable costs/ˈveərɪəbl kɒsts/ | Costs that change as the level of output changes. |
| fixed costs/fɪkst kɒsts/ | Costs that do not change with output over the relevant period and production range. |
| raw materials/rɔː məˈtɪərɪəlz/ | Basic substances used as inputs in making products. |
| total cost/ˈtəʊtl kɒst/ | The sum of all costs of producing a given level of output, including fixed and variable costs. |
| average fixed cost/ˈævrɪdʒ fɪkst kɒst/ | Fixed cost divided by the quantity of output produced. |
| average variable cost/ˈævrɪdʒ ˈveərɪəbl kɒst/ | Total variable cost divided by the quantity of output. |
| average total cost/ˈævrɪdʒ ˈtəʊtl kɒst/ | Total cost divided by the quantity of output produced. |
| marginal cost/ˈmɑːdʒɪnl kɒst/ | The additional total cost of producing one more unit of output. |
Which costs move, and which don't
- Rent on the factory is due whether you make 1 unit or 10,000.
- Wages and materials, though, climb every time you make more.
- Sorting costs by how they behave is the key to pricing a firm's output.
- It starts with two types: fixed and variable.
Fixed and variable costs
- Fixed costs 固定成本 (FC) do not change with output — like factory rent. You pay them even at zero output.
- Variable costs 可变成本 (VC) rise as output rises — like wages and raw materials 原材料.
- Together they make total cost 总成本: $TC = FC + VC$.
Total cost equals fixed cost plus ______ cost.
Difficulty 1/5 · 100 coins + a small bonus on first completion today
TC = FC + VC. Fixed costs stay put; variable costs rise with output.
Match each cost to its example.
Difficulty 2/5 · 140 coins + a small bonus on first completion today
Rent is fixed, wages/materials vary with output, and MC is the cost of the next unit.
Per-unit costs
- Average fixed cost 平均固定成本: $AFC = \tfrac{FC}{Q}$ — always falls as output rises (spread over more units).
- Average variable cost 平均可变成本: $AVC = \tfrac{VC}{Q}$. Average total cost 平均总成本: $ATC = \tfrac{TC}{Q} = AFC + AVC$.
- Marginal cost 边际成本 (MC) is the extra cost of one more unit: $MC = \tfrac{\Delta TC}{\Delta Q}$.
The firm's cost curves
Average cost is U-shaped, and marginal cost cuts it exactly at the minimum. Drag the output and watch marginal cost pull the average up or down.
Total cost is 160 at 10 units and 175 at 11 units. What is the marginal cost of the 11th unit?
Difficulty 2/5 · 140 coins + a small bonus on first completion today
MC = ΔTC/ΔQ = (175 − 160)/1 = 15.
As output rises, average fixed cost:
Difficulty 1/5 · 100 coins + a small bonus on first completion today
The same fixed cost divided by a larger quantity keeps shrinking.
MC cuts the average at its minimum
- When MC is below the average, it pulls the average down; when above, it pulls it up.
- So MC crosses AVC and ATC exactly at their lowest points.
- The curves are U-shaped for the same reason as diminishing returns: cheap extra units at first, dearer ones later.
The marginal cost curve crosses the average total cost curve at its lowest point.
Difficulty 1/5 · 100 coins + a small bonus on first completion today
Below the average MC pulls it down, above it pulls it up — so they cross at the minimum.
If the marginal cost of the next unit is below average total cost, then ATC will:
Difficulty 1/5 · 100 coins + a small bonus on first completion today
A below-average marginal cost pulls the average down.
Worked examples
1. A firm has total fixed cost 100. At $Q = 10$, total variable cost is 150, so $TC = 250$, $ATC = 250/10 = 25$, $AVC = 150/10 = 15$ and $AFC = 100/10 = 10$. Check: $AVC + AFC = ATC$.
2. If producing the 11th unit raises total cost to 262, then $MC = 262 - 250 = 12$. Because $MC < ATC$, the extra unit pulls average total cost down.
Total cost is 200 at 8 units and 232 at 9 units. What is the marginal cost of the 9th unit?
232 minus 200 is 32.
What is the marginal cost of the 9th unit?
Difficulty 1/5 · 100 coins + a small bonus on first completion today
232 minus 200 is 32. Other options — 15 (the lesson marginal cost); 232 (the new total cost).
Total cost = fixed + variable. Per unit: AFC always falls, and ATC = AFC + AVC. Marginal cost crosses AVC and ATC at their minimum points — below the average pulls it down, above pulls it up. All three short-run curves are U-shaped.
Write from a marginal cost of 32
- Total cost is 200 at 8 units and 232 at 9 units.
- Find the marginal cost of the 9th unit.