Importance or Significance of Revenue Curves

The marginal revenue curve helps in the determination of firm’s equilibrium. It is the point of intersection between MR and MC curves which determines the point of equilibrium of a firm. Besides, to calculate the profit and loss of a firm, AR curve is essential. Thus AR and MR curves play an important role in […]

Inter-relationship between AVC, ATC and AFC

The inter-relationship between AVC, ATC and AFC can be summed up as follows: If both AFC and AVC fall, ATC will fall. If AFC falls but AVC rises; ATC will fall where the drop in AFC is more than the rise in AVC. ATC will not fall where the drop in AFC is equal to […]

Average total cost and output and short term cost analysis

Average cost, consists of average fixed costs and average variable costs. As we see, average fixed costs begin to fall with an increase output while average variable costs come down and rise. Till the average variable cost come down, the average total cost also comes down, but a point comes when the average variable costs […]

Average Variable Cost and Output

Average variable costs mean the total variable costs divided by the number of units produced. The Average variable costs will come down and then rise as more and more units are produced with a given plant. This is because as we add more units of variable factors in a fixed plant, the efficiency of the […]

Total Costs

 Total cost means the total cost of producing any given amount of output. When we ass total fixed and total variable costs at different rates of output, we get the corresponding total costs. Thus, TC = TFC + TVC Since, fixed cost are constant and variable costs necessarily rise as output rises, total costs also […]

Total Variable Cost (TVC)

The costs that directly with the output, rising as more is produced and falling as less is produced, are called total variable costs. They are also referred as prime costs or Direct costs or Avoidable costs, Example of variable costs are: (i) wages of temporary laborers; (ii) raw material; (iii) fuel; (iv) Electric power, etc. […]

TYPES OF COSTS

There are many different types of costs that a firm may consider relevant for decision-making under varying situations. The manner in which costs are classified or defined is largely dependent on the purpose for which the cost data are being outlined. Explicit and Implicit Costs: The opportunity cost (or cost of the foregone alternative) of […]