Week 3: Fixed Costs and Marginal Costs

Question 1

Fixed Costs

Answer 1

an expense that a business incurs that doesn’t change based on the amount of goods or services produced

e.g. $300 needed to get a tutoring certification

Question 2

Marginal Costs

Answer 2

the change in total production cost that comes from producing one additional unit

Question 3

equation to find out how to turn a profit of one penny

Answer 3

AC = MC + FC/n

Question 4

fixed vs marginal costs example

Answer 4

Publishing books
-fixed cost: $2000 for the work itself
-marginal cost: $2/copy

Question 5

What’s the general trend of fixed and marginal costs in the media?

Answer 5

-fixed costs are generally high
-first copy is usually expensive but marginal costs usually drop to nearly zero (e.g. broadcasting, internet)