Practice
Short-run costs from a table
Fixed, variable, marginal and average costs read and computed from a firm’s total cost schedule.
The skill
Every short-run cost comes out of the total cost column. Total fixed cost is total cost at zero output, and it stays the same at every output. Total variable cost is total cost minus fixed cost. Average total cost is total cost divided by output, which also equals AFC plus AVC. Marginal cost is the change in total cost from making one more unit. Students often divide by output when they want marginal cost, or forget that fixed cost is inside total cost at every level of output.
A worked example
A firm’s total cost in the short run depends on how many units it makes each day, as shown.
| Output (units) | Total cost ($) |
|---|---|
| 0 | 30 |
| 1 | 51 |
| 2 | 69 |
| 3 | 83 |
| 4 | 95 |
| 5 | 112 |
| 6 | 136 |
What is the average total cost at 3 units, in dollars? Round to two decimal places.
Solution
- Total fixed cost is total cost at zero output: $30. It stays the same at every output.
- Total variable cost at 3 units = total cost − fixed cost = 83 − 30 = $53.
- ATC = 83 ÷ 3 ≈ $27.67, which is also AFC + AVC.
Answer: 27.67