Components of the short run costs of production can be stated as below
Total fixed cost
Total variable cost
Total costs
Marginal cost
Average cost
Average fixed cost
Average variable cost
Fixed costs are expenditure on fixed factors such as Machinery, plants and management
Fixed costs exist even if zero output is produced
Total variable costs are expenditure on variable factors such as raw materials and labour
used in the production
Total cost is all expenditure incurred in the production of a commodity
Total variable cost is zero when the output is zero. As output is increased total variable
costs increase first less rapidly and then more rapidly. The reason is the law of diminishing
returns.
Total cost consists of fixed costs and variable costs.
Marginal cost is the change in total costs as one more unit of output is produced. It is calculated as follows
Average total cost (ATC) is the total cost per unit of output
Average total cost is calculated as follows
Various forms of short run costs of production can be calculated
Average total fixed cost (AFC) is the total fixed cost per unit of output It is calculated as follows
Average variable cost (AVC) is the total variable cost per unit of output It is calculated as follows
The above cost components can be presented in a schedule as below
Total cost, total fixed cost and total variable cost given in the schedule can be illustrated graphically as below
Marginal cost, average cost, average fixed cost and average variable cost given in the schedule can be illustrated graphically as below
