9708 · 7.5
Types of cost, revenue and profit, short run and long run production
**Costs and revenue** (7.5) is core **9708 micro**. Practise **diagram labels** and **calculations** together. This topic feeds directly into **market structures** (7.6) and **firm objectives** (7.8).
Need to know
What you need to know
- Short Run: At least one factor of production is fixed.
- Fixed Costs (FC): Costs that do not vary with output (e.g., rent, insurance).
- Variable Costs (VC): Costs that vary directly with output (e.g., raw materials, wages for production staff).
- Total Cost (TC) = Total Fixed Costs (TFC) + Total Variable Costs (TVC).
- The Law of Diminishing Marginal Returns explains the shape of short-run cost curves.
Explanation
Types of cost, revenue and profit, short run and long run production
- Short Run: At least one factor of production is fixed.
- Fixed Costs (FC): Costs that do not vary with output (e.g., rent, insurance).
- Variable Costs (VC): Costs that vary directly with output (e.g., raw materials, wages for production staff).
- Total Cost (TC) = Total Fixed Costs (TFC) + Total Variable Costs (TVC).