Cost Formulas

Total Revenue = Price x Output

Total Fixed Costs = Sum of all fixed Costs

Total Variable Costs = Sum of all Variable Costs

Total Costs = TFC +TVC

Ave Fixed Costs(AFC) = TFC/Output

Ave Variable Costs (AVC) = TVC/Output

Ave Total Costs (ATC) = TC/Output

Marginal Cost = ^TC/^Output or ^TVC/^Output

Short Run Rules

Price > ATC, produce make profit

ATC > Price > AVC, produce minimize loss

AVC > Price, dont produce limit loss to fixed costs

Long Run Rules

Price > ATC, produce MR=MC

Price < ATC. Stop and sell fixed assets

1. Complete the Table

2. What actions should the firm take in order to maximize profits or minimize loss in each case, and why?

Case #	T. Revenue.	T. Cost	T.V.C.	T.F.C.	Profit	Price	A.T.C.	A.V.C.	A.F.C.	M.C.	Output	Action
1						$ 4.00	$ 3.00	$ 2.00		$ 4.00	600
2	$ 8,000.00						Minimum				200
3	$ 8,000.00	$ 9,000.00					$ 9.00		$ 2.00	$ 8.00
4		$ 16,000.00		$ 7,000.00		$ 9.00		Minimun			1000
5			$ 7,000.00			$ 6.00	$ 8.00			$ 6.00
6	$ 55,000.00		$ 45,000.00	$ 5,000.00				$ 90.00		$ 120.00
7		$ 60,000.00			$ 10,000.00		$ 200.00			$ 200.00
8					$ (1,000.00)	$ 5.00		$ 6.00		$ 5.00	800
9				$ 10,000.00	$ 2,000.00			$ 8.00		Minimum	200
10					$ (200.00)	$ 10.00	$ 12.00	$ 8.00		can't get	100