A glossary of terms in short-run production and cost:
TFC = Total fixed cost (i.e., cost that remains fixed in the short run regardless of the level of TP)
TVC = Total variable cost (i.e., cost that changes with the level of TP due to different amount of variable input used. Also = TVI * w)
TVI = Total variable input (i.e., amount of the single variable input required to produce a given level of TP)
TC = Total cost (i.e., TFC + TVC)
AFC = Average fixed cost (i.e., TFC/TP)
AVC = Average variable cost (i.e., TVC/TP)
ATC = Average total cost (i.e., TC/TP. Also = AFC + AVC)
MC = marginal cost (i.e., ∆TVC/∆TP. Also = w * 1/MP)
TP = Total output as a function of variable input
MP = ∆TP/∆TVI
1/MP = ∆TVI/∆TP (i.e., MVI, marginal variable input)
w = constant unit cost of the single variable input
Short run: a time period that is too short to alter the amount of the fixed inputs.
Variable input: input that can be varied in the amount used in the short run. Only a single variable input is assumed here for the sake of expository simplicity.
Inflection point: a transition point between the increasing-slope segment and the decreasing-slope segment of an S-shaped curve.
