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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Ch. 5.3 Notes: Supply and the Role of Cost
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
1. Example > labor, electricity, other
C. Total Costs = F.C. + V.C.
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
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
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.?