{"id":717,"date":"2020-03-24T04:51:48","date_gmt":"2020-03-24T04:51:48","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/chapter\/cost-functions\/"},"modified":"2023-07-13T01:16:20","modified_gmt":"2023-07-13T01:16:20","slug":"cost-functions","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/chapter\/cost-functions\/","title":{"raw":"Cost Functions","rendered":"Cost Functions"},"content":{"raw":"<div class=\"vtbegenerated\">\r\n\r\nStudents make heavy going sometimes over those cost functions. Here is an example of how a little information can yield lots of cost data.\u00a0If you are given the basic info for a firm (black numbers) you can easily compute other info (red numbers):\r\n\r\nQuantity\u00a0\u00a0\u00a0 Variable Cost\u00a0\u00a0\u00a0 Total Cost\u00a0\u00a0\u00a0 Marginal Cost\u00a0\u00a0\u00a0 Ave. Variable Cost\u00a0\u00a0\u00a0\u00a0\u00a0 Ave. Total Cost\r\n\r\n1\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $30\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $90\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0$30\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0$30\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $90\r\n\r\n2\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a050\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0110\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 20\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a055\r\n\r\nIf at output level 1, Total Cost is 90 and Variable Cost is 30, then Fixed Cost (those costs unrelated to output) must be 60.\r\n\r\nMarginal Cost is the increase in Total Cost associated with a one unit increase in output.\r\n\r\nAlso, <span style=\"font-size: large\">I found a very good explanation of Economies of Scale (link below). This is optional but it might help you understand this somewhat tricky concept.<\/span>\r\n\r\n<span style=\"color: #0000cc;font-size: x-large\"><a href=\"http:\/\/www.investopedia.com\/articles\/03\/012703.asp\" target=\"_blank\" rel=\"noopener noreferrer\">CLICK HERE<\/a><\/span>\r\n\r\n<strong>\"Original document by Peter Turner licensed CC BY\"<\/strong>\r\n\r\n<\/div>","rendered":"<div class=\"vtbegenerated\">\n<p>Students make heavy going sometimes over those cost functions. Here is an example of how a little information can yield lots of cost data.\u00a0If you are given the basic info for a firm (black numbers) you can easily compute other info (red numbers):<\/p>\n<p>Quantity\u00a0\u00a0\u00a0 Variable Cost\u00a0\u00a0\u00a0 Total Cost\u00a0\u00a0\u00a0 Marginal Cost\u00a0\u00a0\u00a0 Ave. Variable Cost\u00a0\u00a0\u00a0\u00a0\u00a0 Ave. Total Cost<\/p>\n<p>1\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $30\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $90\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0$30\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0$30\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $90<\/p>\n<p>2\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a050\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0110\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 20\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a055<\/p>\n<p>If at output level 1, Total Cost is 90 and Variable Cost is 30, then Fixed Cost (those costs unrelated to output) must be 60.<\/p>\n<p>Marginal Cost is the increase in Total Cost associated with a one unit increase in output.<\/p>\n<p>Also, <span style=\"font-size: large\">I found a very good explanation of Economies of Scale (link below). This is optional but it might help you understand this somewhat tricky concept.<\/span><\/p>\n<p><span style=\"color: #0000cc;font-size: x-large\"><a href=\"http:\/\/www.investopedia.com\/articles\/03\/012703.asp\" target=\"_blank\" rel=\"noopener noreferrer\">CLICK HERE<\/a><\/span><\/p>\n<p><strong>&#8220;Original document by Peter Turner licensed CC BY&#8221;<\/strong><\/p>\n<\/div>\n","protected":false},"author":32,"menu_order":2,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-717","chapter","type-chapter","status-publish","hentry"],"part":314,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/pressbooks\/v2\/chapters\/717","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/wp\/v2\/users\/32"}],"version-history":[{"count":2,"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/pressbooks\/v2\/chapters\/717\/revisions"}],"predecessor-version":[{"id":922,"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/pressbooks\/v2\/chapters\/717\/revisions\/922"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/pressbooks\/v2\/parts\/314"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/pressbooks\/v2\/chapters\/717\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/wp\/v2\/media?parent=717"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/pressbooks\/v2\/chapter-type?post=717"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/wp\/v2\/contributor?post=717"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accanderssenmicro\/wp-json\/wp\/v2\/license?post=717"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}