Short-run Total and Average Costs

The Short-run total and average cost is the cost which has short-term implications in the production process, i.e. these are used over a short range of output. In the short run, there are both fixed and variable costs.

Short-run total costs

The total costs are explained below:-

1. Total fixed cost- The total fixed cost is the total amount of cost incurred on the fixed factors in the short-run production process. It remains constant whatever be the level of output, i.e. zero or more. It is also known as an unavoidable cost.
2. Total variable cost- The total variable cost is the total amount of costs incurred on the variable factors in short-run is known as a variable cost. It will change accordingly with the change in output. If output increases, TVC also increases.
3. Total cost- Total cost is the summation of total fixed cost (TFC) and total variable cost (TVC). Since the total fixed cost remains unchanged at all level of output, the trend of the total cost depends upon the trend of total variable cost.

Short-run average cost

1. Average fixed cost – Average fixed cost (AFC) is the per-unit fixed cost of production. Average fixed cost at each level can be identified by dividing the total fixed cost by the corresponding level of output.
2. Average variable cost – Average variable cost (AVC) is the per unit variable cost of production. Average variable cost at each level can be identified by dividing the total variable cost by the corresponding level of output.
3. Average cost – Average cost is per unit cost of production. The average cost at each level of output can be calculated by per-unit cost of the corresponding level of output/production. By per unit cost of production, we mean that all the fixed and variable cost is taken into the consideration for calculating the average cost. Thus, it is also called as Per Unit Total Cost.

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