Costs in the Short Run

Read this section about how to calculate costs in the short-run like variable and marginal costs. Make sure to answer the "Try It" questions.

GLOSSARY

Factor payments:

what the firm pays for the use of the factors of production-includes raw materials, rent, wages and salaries, interest and dividends, and profit for entrepreneurship.

fixed cost:

cost of the fixed inputs; expenditure that a firm must make before production starts and that does not change regardless of the production level

marginal cost:

the additional cost of producing one more unit; mathematically,

total cost:

the sum of fixed and variable costs of production

variable cost:

cost of production that increases with the quantity produced; the cost of the variable inputs