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.

FacebookTwitterGoogle+Share

35 thoughts on “Microeconomics Cost Formulas”

  1. 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?

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

  3. 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*?

  4. 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 ! 🙂

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

    2. 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?

  5. 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

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

  7. 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.

  8. 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

  9. 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.

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

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

  11. 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.

  12. 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

  13. 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?

  14. 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

  15. 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,

Comments are closed.