Let’s work on that lab… We need a little more help.

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Presentation transcript:

Let’s work on that lab… We need a little more help.

Managerial Economics & Business Strategy Chapter 5 The Production Process and Costs

Total and Variable Costs C(Q): Minimum total cost of producing alternative levels of output: C(Q) = VC(Q) + FC VC(Q): Costs that vary with output. FC: Costs that do not vary with output. $ Q C(Q) = VC + FC VC(Q) FC 0

Fixed and Sunk Costs FC: Costs that do not change as output changes. Sunk Cost: A cost that is forever lost after it has been paid. $ Q FC C(Q) = VC + FC VC(Q)