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Ch. 5.3 Notes: Supply and the Role of Cost

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

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  1. Ch. 5.3 Notes: Supply and the Role of Cost

  2. 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

  3. C. Total Costs = F.C. + V.C. 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.?

  4. 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)

  5. 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.?

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