Problem 23

Introduction

Fixed Cost is the cost which remains fixed irrespective of the level of production. For example: rent, insurance premium.

Marginal cost is different from both average total cost and average variable cost. It is the additional cost of producing one more unit of output. So it is not the cost per unit of all units being produced, but only the next one (or next few).

Average total cost (simply referred as average cost) is calculated by dividing the total cost by the quantity of output. 

Average variable cost is known as the average of the variable cost so it is calculated by dividing the total variable cost by quantity of output.