Total fixed cost (TFC)

Cost which doesn’t change with changes in the quantity of output. These costs are buying tractor, irrigation pipe, or simple plow having durable use. Mathematically,

TFC= Unit of fixed factors X price of the factor.

Average fixed cost (AFC)

Total fixed cost/quantity of output (Kg or quintal) i.e. AFC=TFC/y

Fig: Graph of Average Fixed cost

Total variable cost (TVC)

Sum of amounts spent for each of the variable inputs used.

Average variable cost (AVC)

Total variable cost by dividing the quantity of output ( i.e. AVC=TVC/y)

Fig: Graph of Average Variable Cost

Marginal cost

Marginal cost is the addition made to the total cost by the production of one more unit of output. According to Dooley, MC is the change in total cost associated with the change in output;

i.e, MC = (change in total cost)/(change in output)

Mathematically, TC is the first derivative of the TC function: MC=δC/ δX

Graphically, MC is the slope of the TC curve. MC curve follow U shape.

Relation: When AC falls, MC is less than AC, AC rises, MC is greater than AC, MC cut AC at its lowest point.

Fig: MC with AC VC and FC