** What are the Relationships Between the Various Costs?**

Section 3 provides definitions of the important economic costs. Below is a list of the relationships between these costs. Using the abbreviations from the previous section, and using Q as the number of goods or services produced, we have

1. TVC + TFC = TC

2. AVC = TVC/Q

3. AFC = TFC/Q

4. ATC = TC/Q

5. MC = change in TC/change in Q

**Examples*** *

**Example 1**

Problem: Let’s suppose that fixed costs are $300 and variable costs are $900. What is total cost?

Solution: Total cost = $300 + $900 = $1,200

**Example 2**

Problem: Let’s suppose that you produce 50 bushels of apples, and you use the costs from Example 1. What are average variable costs and average fixed costs?

Solution: AVC = $900/50 = $18, and AFC = $300/50 = $6

**Example 3**

Problem: In the above example, what is average total cost?

Solution: ATC = $1,200/50 = $24

** Example 4
** Problem: If you increase your production by 5 bushels, and your total cost increases by $60, what is your marginal cost?

Solution : MC = $60/5 = $12

**Example 5**

Problem: In the following table, a firm has a choice of producing from zero to 4 products. We know some of the costs. Can you calculate the missing values?

Q |
TC |
TFC |
TVC |
ATC |
AFC |
AVC |
MC |

0 | 80 | ||||||

1 | 80 | ||||||

2 | 110 | ||||||

3 | 70 | ||||||

4 | 90 |

The following table is a copy of the above table with the missing values filled in. The dashes indicate that the values cannot be calculated (undefined) because the quantity is zero.

Solution:

Q |
TC |
TFC |
TVC |
ATC |
AFC |
AVC |
MC |

0 | 80 | 80 | 0 | – | – | – | – |

1 | 160 | 80 | 80 | 160 | 80 | 80 | 80 |

2 | 220 | 80 | 140 | 110 | 40 | 70 | 60 |

3 | 290 | 80 | 210 | 96.7 | 26.7 | 70 | 70 |

4 | 380 | 80 | 300 | 95 | 20 | 75 | 90 |

**Video Explanation**

For a video explanation of cost calculations, please watch:

How to get Total Variable Cost if the given are Quantity, Total Fixed Cost, and Marginal Cost?

Thanks for your question, Meg. The video in this section explains how to calculate the different costs. One thing to keep in mind is that at quantity zero, total variable cost equals total fixed cost (because total variable cost at quantity zero is $0).

So you start your first TVC the same with TFC?

TVC at quantity zero is $0.

To get Tvc subtract TFC from TC