1. How do Firms Calculate Costs?
Fixed cost or variable cost?
Profit or revenue?
Marginal cost?

2. Remember: Cost does NOT equal Price
Price is what consumers pay
Cost is an expense to the supplier
Examples of costs:
Wages of employees
Flour for a pizza parlor
Green paint for John Deere
Gas for a Taxi cab

3. FIXED COSTS- costs that stay the same regardless of quantity supplied
EXAMPLES
-rent
-property taxes
-management salary

4. VARIABLE COSTS- costs that change as quantity supplied changes
EXAMPLES
-labor
-raw materials

5. College Board Vice President Trevor Packer
AP Exam Readers
College Board Vice President Trevor Packer
Readers- VC
Managers- FC

6. Salt Palace Convention Center
Rent- FC

7. Shipping costs to ship 250k exams securely
Shipping- VC

8. FC- rent, machinery repair, property tax, mgr salary
VC- employees, cups, beans, ingredients

9. List Examples: -Fixed costs -Variable costs
FC- cost of the land, tools (short term), property tax
VC- compost, seeds, water, chemicals

10. ASSIGNMENT Watch as I demonstrate how to calculate costs
Work together to practice cost calculation
Calculate on your own and check your answers
Be prepared for Monday quiz over costs
TC= FC + VC
TR= PxQ
Profit= TR-TC
MC= change in TC per unit of output
MR= change in TR per unit of output