Changes

8.  "calculating overall costs (total cost and average variable cost) based on wages"

8.  "calculating overall costs (total cost and average variable cost) based on wages"

:The key here is simply to be careful in doing the calculations, and then double-check your answer.  '''''You need to be sure you are using the correct level of output before you calculate the total cost (TC) and average variable cost (AVC) at that level of output'''''.  To find the total cost, add the fixed cost (FC) to the labor cost (total wages times the number of workers), '''''for a given level of output'''''.  Then, to find the average variable cost, find the total variable cost (TVC=TC-FC) and divide by that level of output.

:The key here is simply to be careful in doing the calculations, and then double-check your answer.  '''''You need to be sure you are using the correct level of output before you calculate the total cost (TC) and average variable cost (AVC) at that level of output'''''.  To find the total cost, add the fixed cost (FC) to the variable cost (the variable cost is usually the labor cost: total wages times the number of workers), '''''for a given level of output'''''.  Then, to find the average variable cost, find the total variable cost (TVC=TC-FC) and divide by that level of output.

:''Example'':  a firm can produce 100 units with 5 workers and 200 units with 10 workers.  Its fixed cost is $50 and its wage rate is $20 per worker.  What is its total cost and average variable cost to produce 100 units?

:''Example'':  a firm can produce 100 units with 5 workers and 200 units with 10 workers.  Its fixed cost is $50 and its wage rate is $20 per worker.  What is its total cost and average variable cost to produce 100 units?