Problem 3

Introduction

Total cost refers to the entire cost made by the firm which includes both fixed and variable cost. Mathematically it can be written as Fixed Cost + Variable Cost = Total Cost.

Average variable cost is taken by dividing the average cost by the total quantity.

Average total cost is taken by dividing the total cost by the total quantity.

Marginal cost refers to the change in the total cost due to an increase in the original quantity produced by an additional unit. It is defined as the expense of producing one additional unit of a product.