Living Economics

Cost Glossary - Notes
A glossary of terms in short-run production and cost

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.

Access Tools
• Advanced Search
• Browse Micro
Comparative advantage (14) Competitive strategy (27) Costs and opportunities (53) Entrepreneurship (3) Externality (29) Free Market Solutions (17) Free Ridership (3) Game Theory (22) Incentives (13) Income Distribution (25) Information (20) Labor Market (24) Marginal optimization (33) Market Demand (17) Market Entry (9) Market Exit (2) Market Intervention (12) Market Structure (29) Market supply (4) Material Flow (2) Miscellaneous (3) Price Discrimination (17) Pricing Strategy (47) Profit maximization (48) Property Rights (43) Regulation (16) Rent Seeking (2) Risk Taking (12) Scarcity (10) Tastes & Preferences (31) Taxes (7) Technology (9) Type of goods (31) What Price Means (28)
• Browse Macro
Boom and Bust (9) Budget Balance (12) Comparative advantage (13) Economic Development (1) Economic Indicators (6) Fiscal Policy (12) Incentives (1) Income and output (25) Income Distribution (5) Labor Market (6) Money and Credit (20) Regulation (5) Rent Seeking (1) Saving (6) Taxes (4) Technology (1) Trade and Foreign Exchange (30)
• Glossary
List All
Search

• Microeconomics Lectures • Macroeconomics Lectures • Economics Cartoons
Instructor
• Instructor Log in • Sample TOC • Video Tour
Student
• Student Log in
Close
Instructor Log in

Class
Close
Student Log in


Open Menu
Term
Definition