DiscussEconomics

Microeconomics Cost Formulas

·

Here is a list of some of basic microeconomics formulas pertaining to revenues and costs of a firm. Remember when you’re using these formulas there are a variety of assumptions, namely, that the the firm is profit-maximizing (making as much money as they can.)

Here are total cost formulas, average variable, marginal cost, and more, (work out your own algebra to find alternatives):


Average Total Cost (ATC) = Total Cost / Q (Output is quantity produced or ‘Q’)Average Variable Cost (AVC) = Total Variable Cost / QAverage Fixed Cost (AFC) = ATC – AVC

Total Cost (TC) = (AVC + AFC) X Output (Which is Q)

Total Variable Cost (TVC) = AVC X Output

Total Fixed Cost (TFC) = TC – TVC

Marginal Cost (MC) = Change in Total Costs / Change in Output

Marginal Product (MP) = Change in Total Product / Change in Variable Factor

Marginal Revenue (MR) = Change in Total Revenue / Change in Q

Average Product (AP) = TP / Variable Factor

Total Revenue (TR) = Price X Quantity

Average Revenue (AR) = TR / Output

Total Product (TP) = AP X Variable Factor

Economic Profit = TR – TC > 0

A Loss = TR – TC < 0

Break Even Point = AR = ATC

Profit Maximizing Condition = MR = MC

Explicit Costs = Payments to non-owners of the firm for the resources they supply.

46 responses to “Microeconomics Cost Formulas”

  1. Rosa Avatar
    Rosa

    you are the best, and very useful, I was having hard time calculating total cost, how to calculate actually but no website could help me beside this, you are the greastes, and thank you and keep on upgrading us,

    Reply
    1. enoch junior Avatar
      enoch junior

      very true

      Reply
  2. barry econ Avatar
    barry econ

    Happy to help, glad they worked for you.

    Reply
  3. John Anderson Avatar
    John Anderson

    Hi: I am really having a hard time calculating the total product. The formula above says:
    TP=AP X Variable Factor while
    AP=TP/Variable Factor
    So it’s like a catch22 – to calculate TP, you have to know the AP, but to calculate AP, you have to know the TP !!

    Say I have a demand function: Q=50L+6L^2+0.5L^3
    I calculated L=4

    Solution provided =
    For Variable Factor=1, TP=50+6-0.5=55.50, Thus AP=55.50 and MP=55.50 – cool !!

    But for Variable Factor=2, TP=120.00 – How? This is what I don’t understand.
    AP=TP/VF=60, and MP=Change in TP value=120-55.50=64.50

    Can you help me understand how to calculate the TP?

    Solution provided for VF=3, TP=190.50, AP=63.50 & MP=70.50
    for VF=4, TP=264.00, AP=66.00 & MP=73.50 and so on.

    Thank you very much for your help.

    Best Regards,

    JD

    Reply
  4. barry econ Avatar
    barry econ

    Are you sure the solution for #1 is correct? If you insert the variable factor it’s not TP=50+6-0.5=55.50 but TP=50+6^2-0.5^3^ =

    Is it not?

    Reply
  5. Danielle Avatar
    Danielle

    I am having trouble finding the break even point. If i have the following information how do i find it? I have the MC, AVC and AC

    Reply
  6. sanjay Avatar
    sanjay

    total cost function of a firm is tc = 1050 + 10qsquare + 8q find the mc of firm when the quantity produced is 15. iam unable to find the solution , mc shows the answer 20q + 8 how it is calculated pls help me.

    Reply
  7. then Avatar
    then

    If 20q + 8 is the answer then that’s just basic calculus off of 10q2 + 8q

    Reply
  8. HAJEBA Avatar
    HAJEBA

    You are the one where to find required knowledge in economic thinking and I will always visit your website. Thank you

    Reply
  9. Stephan Avatar
    Stephan

    I have this problem and can not figure out how to compute. Can you help me to compute?
    Example. output (Q) is given let’s say 3, Total Revenue (TR) is 96, and total Cost (TC) is 44. I need to compute marginal revenue and average revenue functions. I can compute the average revenue, but got confused in computing marginal revenue.

    Thank you.

    Reply
    1. Rachel Avatar
      Rachel

      How did you calculate average function if no total cost function was given? Either way, to find marginal function from total function, simple derivate.

      Reply
  10. Paul Avatar
    Paul

    Try posting in the forum with your question.

    Reply
  11. Nus Avatar
    Nus

    Hi, I’ve been given the ffg infomation and need to find the optimal level of output for profit maximizatio (i.e MR=MC)

    TP TFC TVC
    0 100 0
    1 100 90
    2 100 170
    3 100 240
    4 100 300
    5 100 370
    6 100 450
    7 100 540
    8 100 650
    9 100 780
    10 100 930

    So far this is what I have calculated:

    TC TR MR
    100 0
    190 110 110
    440 220 110
    820 330 110
    1300 440 110
    1950 550 110
    2800 660 110
    3880 770 110
    5300 880 110
    7120 990 110
    9400 1100 110

    And

    MC

    90
    250
    380
    480
    650
    850
    1080
    1420
    1820
    2280

    I still do not know how to solve for MR=MC Mathematicaly.
    Your help will be much appreciated

    Reply
  12. barry econ Avatar
    barry econ

    Might be a trick questions in that MR = MC so in this theoretical case if you have MC then you have MR and work backwards.

    Reply
  13. suzie Avatar
    suzie

    can you list for me the basic formulas for elasticity?

    Reply
  14. suzie Avatar
    suzie

    any BASIC info to help me understand introductory economics would be appreciated.

    Reply
  15. Helen Avatar
    Helen

    how do you find out the coupn rate when you know the bond value and the coupone rate?

    Reply
  16. annette Avatar
    annette

    please help variable input of labor. 50 workers are used average product of laboris 50. Marginal product of the 50 worker is 75. wage rate is $80 and the total cost of the fixed input is $500.

    What is th average variable cost
    What is the marginal cost
    What is the average total cost

    Reply
  17. Brandi Avatar
    Brandi

    Hello, does anyone know how to calculate Price??? is there a formula to use??

    Reply
    1. Kingsleyotchere Avatar
      Kingsleyotchere

      brandi,since total revenue is price by quantity.u can manipulate that to arrive at your price.

      Reply
      1. Rleziert Avatar
        Rleziert

        what do u mean u can manipulate it? if 9 is the price and 15 million is the quantity, how much in total are the buyers paying?

  18. Mal Avatar
    Mal

    Thank you so much ! This helped me a lot in my economics worksheet ! Tomorrow is my exam ! I would say this is much, much better than my economics sir ! 🙂

    Reply
  19. creelman hassan Avatar
    creelman hassan

    i have learnt alot from your formulars
    thanks very much
    ma exam is 2moro

    Reply
  20. John Avatar
    John

    thanks for the formula

    Reply
  21. Hunain.H.Bilgrami Avatar
    Hunain.H.Bilgrami

    Thanks for this formulas

    Reply
  22. Yongquer Avatar
    Yongquer

    thanks for this formulas! now im sure, i can answer now my assignments!

    Reply
  23. Avatar
    Anonymous

    wow thanks currently studying this for my test today

    Reply
  24. Varun1985actuary Avatar
    Varun1985actuary

    Thanks a lot for these formulas, varun

    Reply
  25. Abbyra2009 Avatar
    Abbyra2009

    thank you so much for making my assignment so much easier to get through.

    Reply
  26. Sayed Hamidullah Avatar
    Sayed Hamidullah

    thanks for the formula

    Reply
  27. Mary Avatar
    Mary

    Hi !
    Can you help me ?
    The demand curve for fish is D(P)= 200-5P and the supply curve S(P)=5P.
    How will I solve for q* and P*?

    Reply
  28. Adam Avatar
    Adam

    I have total cost and quantity..now hw can I know TVC and TFC?

    Reply
  29. lazaro Avatar
    lazaro

    I need to find the Quantity in order to find the AVC to know if the business will continue operating or shutdown?

    Reply
    1. Ro Econ Avatar
      Ro Econ

      You require more variables to input.

      Reply
  30. Jodie Avatar
    Jodie

    Thank you for the formulas!!!!!!!!!

    Reply
  31. Elise Avatar
    Elise

    Hi! I need help finding the total cost for something. I have price, quantity, TR, and MR. Is there a way to find Total Cost using those?

    Reply
  32. Lu-Ann Charles Avatar
    Lu-Ann Charles

    RIght now im struggling a lot. i have a table here that only gave the quantity, but expects you to find out TC, FC, VC, AFC, AVC, ATC and MC.

    Reply
  33. Payal Avatar
    Payal

    Hi I have a question!

    Market Demand 100-4Q and Market Supply 10+2Q what is the Total Paid (TP)?

    Market Demand P=130-Q and Market Supply P=10+5Q what is the Total Variable Cost (TVC)?

    Reply
  34. lowla Avatar
    lowla

    Hi, please help I am struggling to get the TC with the formulars given. I have 15 units produced, TVC= 5000 and AFC=350.

    Reply
    1. ingrid Avatar
      ingrid

      TVC= AVC*Q; 5000/15 To get the AVC. 333.33333.
      TC= (AVC+AFC)* Q
      333.33+350)*15
      =10249

      Reply
  35. Anonymous

    4.5

    Reply
  36. Anonymous

    5

    Reply
  37. Anonymous

    1

    Reply
  38. Anonymous

    1.5

    Reply
  39. Anonymous

    3.5

    Reply
  40. Lameck gori Avatar
    Lameck gori

    Hi
    please help me solve this question
    Given the following cost function for a competitive firm C(Q)=40+20Q^2.Find the firm’s
    a)average cost
    b)marginal cost
    c)variable cost
    d)fixed cost

    Reply

Leave a Reply to HAJEBACancel reply

Get updates

From art exploration to the latest archeological findings, all here in our weekly newsletter.

Subscribe

%d bloggers like this: