Types of costs: total cost and average cost

Average Cost is also known as cost per unit. If total cost of production is divided by the total number of units produced, we get the average cost.

In other-words, Average Cost at any output = Total Cost/ Units of Output

Average cost is the sum of average variable cost and average fixed cost. It is also called average total cost. If the total cost of producing 120 units of a commodity is 2400 rupees then average cost will be 2400/ 120 =Rs. 20. On the other-hand, Average Cost helps in fixing or determining the total quantity for sale. The difference between average revenue and average cost shows the profit per unit. If the profit is multiplied with the total production (Units of production) we get the total or gross profit.

Average product (AP) is the total product divided by the number of units of input, which is usually labor.

Average Product =Total Product

Input Quantity

So if 10 workers can produce 50 widgets, then the average product = 5 widgets per worker.

Total cost (TC) is the cost to produce a firm's entire output. Therefore:

Total Cost = Fixed Costs + Variable Costs

The average total cost (ATC) equals the total cost divided by the quantity of product produced.

AverageTotalCost

=

TotalCost TotalProduct

The average fixed cost (AFC) equals total fixed costs divided by total product:

Production and natural economy (натуральноехозяйство)

Production -The processes and methods used to transform tangible inputs (raw materials, semi-finished goods, subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services. Resources are used in this process to create an output that is suitable for use or has exchange value.

Natural economy-refers to a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom. In the more complex forms of natural economy, some goods may act as a referent for fair bartering, but generally currency plays only a small role in allocating resources. As a corollary, the majority of goods produced in a system of natural economy are not produced for the purpose of exchanging them, but for direct consumption by the producers (subsistence).