L

LW
W
K

W
W
K E
K E
K E

W
K

W


W
K E
K E
K E
K E

W
K

- -

L

Costs Theory
W

K

What is Costs? W
K
K

Accounting CostsExplicit Costs

Implicit Costs

- -

L

E FK
Opportunity Cost

K

Profit Concept in Economics WW
Economic Profit
Total Costs
Total Revenue

K
E F

E F

EF
Normal Profit

KEF

Costs of Production in the Short-Run WW

K
K

- -

L

K
EF

E JF
K

E JF

Q L
MC TC * VC FC
J







J J
x Z*
HZ*
DZ*

- -

L

E F
WEF

Fixed Costs (FC)WE
Fixed Costs

K
E JF(FC)
(FC)

KKKKKK
K

E JF
FC

- -

L

- -

L

Variable Costs (VC)WE2

Variable Costs
(VC)

K
K
E JF(VC)
(VC)
K

K

E JF
VC

- -

L

Total Costs (TC)WE3

(FC)Total Costs

W(VC)

+ =

TC = FC + VC


K
E JF(TC)
(TC)

K

E J3F
TC

- -

L

K

Average and Marginal Costs the Short-Run WW

EF
W

Average Fixed Costs (AFC)WE
Average Fixed Costs

W


=


AFC = FC
Q

E FE
FEF

K



- -

L

Average Variable Costs (AVC)WE2

Average Variable Costs

W



=


AVC = VC
Q

K

Average Total Costs (ATC)WE3
Total Variable Costs

W



=


ATC = TC
Q

- -

L

K

Marginal Costs (MC)WE4

Marginal Costs
KEF
W


=



MC = TC
Q

W


MC = VC
Q

- -

L

SummaryW

E F E
K

E

K

E
K

E
K

K E

E
K

E
K

E
K

E F E
K

- -

L

W

W
E
E
E
E
E

W

K



MC TC VC FC MP *Q L








*

- -

L

W
K E
K E
E
E
E
E


W
W
K E
K E
K E

- -