The firm pays $25 per hour for workers and has fixed costs that work out to $100 per hour.TVC or total variable cost, is L x 25.
TC or total cost, is TVC + $100.
AVC or average variable cost, is TVC ÷ Q.
AFC or average fixed cost, is $100 ÷ Q.
ATC is TC ÷ Q .
MC or marginal cost, is the change in cost divided by the change in output. Each added worker costs $25 per hour, we divide this by the added output or marginal product of each added worker to obtain marginal cost.
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved