Introduction to Costs in the Short Run

What you’ll learn to do: calculate, graph and understand production costs in the short run

Rolls of fabric on a storage cart in a factory.

It’s obvious that a firm’s total revenue must exceed total costs if it wants to make a profit. In this section, you’ll see why it’s helpful for firms to break down and examine their costs in different ways.  We will look at fixed versus variable costs, average versus marginal costs, and more. The purpose of these different concepts is to give the firm a better picture of how they can become more profitable.