Section 3 provides interpretations of the important economic costs. Below is a list of the relationships in between these costs. Making use of the abbreviations from the ahead section, and using Q as the number of goods or services produced, us have

1. TVC + TFC = TC2. AVC = TVC/Q3. AFC = TFC/Q4. ATC = TC/Q5. MC = readjust in TC/change in Q

Examples 

Example 1

Problem: Let’s suppose that fixed prices are $300 and also variable expenses are $900. What is full cost?

Solution: total cost = $300 + $900 = $1,200

Example 2

Problem: Let’s intend that you develop 50 bushels that apples, and you use the prices from example 1. What are mean variable costs and average solved costs?

Solution: AVC = $900/50 = $18, and also AFC = $300/50 = $6

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Example 3

Problem: In the above example, what is average complete cost?

Solution: ATC = $1,200/50 = $24

example 4 Problem: If you increase your production by 5 bushels, and also your complete cost boosts by $60, what is your marginal cost?

Solution : MC = $60/5 = $12

Example 5

Problem: In the following table, a firm has a selection of producing from zero come 4 products. We recognize some that the costs.


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Deserve to you calculation the lacking values?

QTCTFCTVCATCAFCAVCMC
080
180
2110
370
490

The following table is a copy of the over table v the absent values to fill in. The dashes suggest that the worths cannot it is in calculated (undefined) since the quantity is zero.

Solution:

QTCTFCTVCATCAFCAVCMC
080800
11608080160808080
222080140110407060
32908021096.726.77070
43808030095207590

Video ExplanationFor a video explanation of price calculations, please watch: