Problem 3

Introduction

Total Cost is the overall cost borne by the firm it includes both fixed and variable Cost. So, the formula to calculate the total cost is Fixed Cost + Variable Cost= Total Cost.

Average Variable Cost is calculated by dividing the Average Cost with the quantity.

Average Total Cost is calculated by dividing the Total Cost with the quantity.

Marginal Cost is defined as the change in the total cost due to an incremented in the quantity produced by one unit, that is, it is defined as the cost of producing one more unit of a good.