| A | B |
|---|
| fixed costs | Any cost that a firm bears in the short run that does not depend on its level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run. |
| variable costs | Any cost that a firm bears that depends on the level of production chosen. |
| total cost (TC) | Fixed costs plus variable costs. |
| total fixed costs (TFC), or overhead | The total of all costs that do not change with output, even if output is zero. |
| sunk costs | Another name for fixed costs in a short run because firms have no choice but to pay them. |
| average fixed cost(AFC) | Total fixed cost devided by the number of units of output; a per unit measure of fixed costs. |
| spreding overhead | The process of dividing total fixed costs by more units of output. Average fixed cost declines as q rises. |
| total variable cost (TVC) | The total of all costs that depend on or vary with output in the short run. |
| total variable cost curve | A graph that shows the relationship between total variable cost and the level of firm's output. |
| marginal cost (MC) | The increase in total cost that results from producing one more unit of output. Marginal costs reflect changes in variable costs. |
| average variable cost (AVC) | Total variable cost divided by the number of units of output. |
| average total cost (ATC) | Total cost divided by the number of units of output. |
| total revenue (TR) | The total amount that a firm takes in from the sale of its product: The price per unit times the quantity of output the firm decides to produce P x q). |
| marginal revenue (MR) | The additinal revenue that a firm takes in when it increases output by one additional unit. In perfect competition, P = MR. |
