Ch 5 3 notes supply and the role of cost
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Ch. 5.3 Notes: Supply and the Role of Cost. Businesses have the following costs to pay every month as they run their business A. Fixed Costs > costs that do not vary/change every month 1. Example > rent, taxes, interest on

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  • Businesses have the following costs to pay every month as they run their business

    A. Fixed Costs > costs that do not

    vary/change every month

    1. Example > rent, taxes, interest on

    loans, payment on loans

    B. Variable Costs > cost that change according

    to performance or output of business every

    month

    1. Example > labor, electricity, other

    utilities, supplies


C. Total Costs = F.C. + V.C. they run their business

D. Example:

Rent = $1200

Supplies = $300

Payment on business loan = $200

Workers/Labor = $800

Utilities = $150

1. What is F.C.?

2. What is V.C.?

3. What is T.C.?


E. Marginal Costs > cost of producing they run their business

one additional unit of a product

1. Example: To make 10 burgers costs

$15. If they make 11 burgers it costs

$16. What is M.C. of 11th burger?

II. Measuring Revenue

A. Total Revenue > money going to

business (quantity sold x price)


B. Marginal Revenue > Revenue they run their business

associated with making one more sale

1. Example : TR for selling 10 burgers is

$30. TR for selling 11 burgers is $33.

What is M.R.?


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