ECON 1100 1nd Edition Lecture 18 Outline of Last Lecture I. Accounting & Economic ProfitOutline of Current Lecture I.Variable & Fixed CostsCurrent LectureI. Variable & Fixed CostsWhat happens toproduction, affects the costsWant more output = costsmoreIf stop producing, variablecost goes to 0Symbols on the GraphTC = Total CostTVC = Total Variable CostTFC = Total Fixed CostA = sections that equal one anotherB = another sectionTFC is the independent of outputTC is short run total fixed cost + total variable costMarginal thinking = ‘can we do better?’These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Marginal Cost (MC) – change in total cost that result from small (1 unit) in change in outputNeed slope to determine increase in costsSlope TC = MCStart steep, fall, start rising againMFC, MVC, & MTC are not important to knowTC = TFC + TVCFC -> slope = 0, don’t changeVC & TC -> slope is the same because they’re parallel soMVC = MTCSlope = TC/QAvg. Cost (Unit Cost)ATC = TC/qAVC = TVC/qAFC = TFC/qATC = AVC + AFCIf MC > ATC, then ATC increasesIf MC < ATC, then ATC decreasesTherefore, if MC = ATC, ATC is constantAFC =
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