Short term is a period of time during which some factors of production are constant and others are variable.

Fixed factors include fixed assets and the number of firms operating in the industry. During this period, the company has the opportunity to vary only the degree of utilization of production capacity.

Long term is a period of time during which all factors are variable. In the long term, a company has the opportunity to change the overall size of buildings, structures, the amount of equipment, and the industry - the number of firms operating in it.

Fixed costs (FC) - these are costs, the value of which in the short term does not change with an increase or decrease in production volume.

Fixed costs include costs associated with the use of buildings and structures, machinery and production equipment, rent, major repairs, as well as administrative costs.

Because As production volume increases, total revenue increases, then average fixed costs (AFC) represent a decreasing value.

Variable costs (VC) - these are costs, the value of which changes depending on the increase or decrease in production volume.

Variable costs include the cost of raw materials, electricity, auxiliary materials, and labor.

Average variable costs (AVC) are:

Total costs (TC) – a set of fixed and variable costs of the company.

Total costs are a function of output produced:

TC = f (Q), TC = FC + VC.

Graphically, total costs are obtained by summing the curves of fixed and variable costs (Fig. 6.1).

Average total cost is equal to: ATC = TC/Q or AFC +AVC = (FC + VC)/Q.

Graphically, ATC can be obtained by summing the AFC and AVC curves.

Marginal Cost (MC) is the increase in total costs caused by an infinitesimal increase in production. Marginal cost usually refers to the cost associated with producing an additional unit of output.

20. Long-run production costs

The main feature of costs in the long run is the fact that they are all variable in nature - the firm can increase or reduce capacity, and it also has enough time to decide to leave a given market or enter it by moving from another industry. Therefore, in the long run, average fixed and average variable costs are not distinguished, but average costs per unit of production (LATC) are analyzed, which in essence are also average variable costs.

To illustrate the situation with costs in the long run, consider a conditional example. Some enterprise expanded over a fairly long period of time, increasing its production volumes. The process of expanding the scale of activity will be conditionally divided into three short-term stages within the analyzed long-term period, each of which corresponds to different enterprise sizes and volumes of output. For each of the three short-term periods, short-term average cost curves can be constructed for different enterprise sizes - ATC 1, ATC 2 and ATC 3. The general average cost curve for any volume of production will be a line consisting of the outer parts of all three parabolas - graphs of short-term average costs.

In the example considered, we used a situation with a 3-stage expansion of the enterprise. A similar situation can be assumed not for 3, but for 10, 50, 100, etc. short-term periods within a given long-term period. Moreover, for each of them you can draw the corresponding ATS graphs. That is, we will actually get a lot of parabolas, a large set of which will lead to the alignment of the outer line of the average cost graph, and it will turn into a smooth curve - LATC. Thus, long-run average cost (LATC) curve represents a curve that envelops an infinite number of short-term average production cost curves that touch it at their minimum points. The long-run average cost curve shows the lowest cost per unit of production at which any level of output can be achieved, provided that the firm has time to change all factors of production.

In the long run there are also marginal costs. Long Run Marginal Cost (LMC) show the change in the total amount of costs of the enterprise in connection with a change in the volume of output of finished products by one unit in the case when the company is free to change all types of costs.

The long-run average and marginal cost curves relate to each other in the same way as the short-run cost curves: if LMC lies below LATC, then LATC falls, and if LMC lies above laTC, then laTC rises. The rising portion of the LMC curve intersects the LATC curve at the minimum point.

There are three segments on the LATC curve. In the first of them, long-term average costs are reduced, in the third, on the contrary, they increase. It is also possible that there will be an intermediate segment on the LATC chart with approximately the same level of costs per unit of output at different values ​​of output volume - Q x. The arcuate nature of the long-term average cost curve (the presence of decreasing and increasing sections) can be explained using patterns called positive and negative effects of increased scale of production or simply scale effects.

The positive effect of scale of production (the effect of mass production, economies of scale, increasing returns to scale of production) is associated with a decrease in costs per unit of production as production volumes increase. Increasing returns to scale of production (positive economies of scale) occurs in a situation where output (Q x) grows faster than costs rise, and therefore the enterprise's LATC falls. The existence of a positive effect of production scale explains the descending nature of the LATS graph in the first segment. This is explained by the expansion of the scale of activity, which entails:

1. Increased labor specialization. Labor specialization presupposes that diverse production responsibilities are divided among different workers. Instead of carrying out several different production operations simultaneously, which would be the case with a small enterprise, in conditions of mass production each worker can limit himself to one single function. This results in an increase in labor productivity and, consequently, a reduction in costs per unit of production.

2. Increased specialization of managerial work. As the size of an enterprise grows, the opportunity to take advantage of specialization in management increases, when each manager can focus on one task and perform it more efficiently. This ultimately increases the efficiency of the enterprise and entails a reduction in costs per unit of production.

3. Efficient use of capital (means of production). The most efficient equipment from a technological point of view is sold in the form of large, expensive kits and requires large production volumes. The use of this equipment by large manufacturers allows them to reduce costs per unit of production. Such equipment is not available to small firms due to low production volumes.

4. Savings from using secondary resources. A large enterprise has more opportunities to produce by-products than a small company. A large firm thus makes more efficient use of the resources involved in production. Hence the lower costs per unit of production.

The positive effect of scale of production in the long run is not unlimited. Over time, the expansion of an enterprise can lead to negative economic consequences, causing a negative effect of scale of production, when the expansion of the volume of a company's activities is associated with an increase in production costs per unit of output. Diseconomies of scale occurs when production costs rise faster than production volume and, therefore, LATC rises as output increases. Over time, an expanding company may encounter negative economic facts caused by the complication of the enterprise management structure - the management floors separating the administrative apparatus and the production process itself are multiplying, top management turns out to be significantly removed from the production process at the enterprise. Problems arise related to the exchange and transmission of information, poor coordination of decisions, and bureaucratic red tape. The efficiency of interaction between individual divisions of the company decreases, management flexibility is lost, control over the implementation of decisions made by the company's management becomes more complicated and difficult. As a result, the operating efficiency of the enterprise decreases and average production costs increase. Therefore, when planning its production activities, a company needs to determine the limits of expanding the scale of production.

In practice, cases are possible when the LATC curve is parallel to the x-axis at a certain interval - on the graph of long-term average costs there is an intermediate segment with approximately the same level of costs per unit of output for different values ​​of Q x. Here we are dealing with constant returns to scale of production. Constant returns to scale occurs when costs and output grow at the same rate and, therefore, LATC remains constant at all output levels.

The appearance of the long-term cost curve allows us to draw some conclusions about the optimal enterprise size for different sectors of the economy. Minimum effective scale (size) of an enterprise- the level of output from which the effect of savings due to an increase in the scale of production ceases. In other words, we are talking about such values ​​of Q x at which the company achieves the lowest costs per unit of production. The level of long-term average costs determined by the effect of economies of scale affects the formation of the effective size of the enterprise, which, in turn, affects the structure of the industry. To understand, consider the following three cases.

1. The long-term average cost curve has a long intermediate segment, for which the LATC value corresponds to a certain constant (Figure a). This situation is characterized by a situation where enterprises with production volumes from Q A to Q B have the same cost. This is typical for industries that include enterprises of different sizes, and the level of average production costs for them will be the same. Examples of such industries: wood processing, timber industry, food production, clothing, furniture, textiles, petrochemical products.

2. The LATC curve has a fairly long first (descending) segment, in which there is a positive effect of production scale (Figure b). The minimum cost is achieved with large production volumes (Q c). If the technological features of the production of certain goods give rise to a long-term average cost curve of the described form, then large enterprises will be present in the market for these goods. This is typical, first of all, for capital-intensive industries - metallurgy, mechanical engineering, automotive industry, etc. Significant economies of scale are also observed in the production of standardized products - beer, confectionery, etc.

3. The falling segment of the long-term average costs graph is very insignificant; the negative effect of scale of production quickly begins to work (Figure c). In this situation, the optimal production volume (Q D) is achieved with a small volume of output. If there is a large-capacity market, we can assume the possibility of the existence of many small enterprises producing this type of product. This situation is typical for many sectors of the light and food industries. Here we are talking about non-capital-intensive industries - many types of retail trade, farms, etc.

Selecting factors of production that minimize production

Let's start by considering the fundamental problem that all firms face: how to choose the combination of factors to achieve a certain level of output at minimum cost. To simplify, let's take two variable factors: labor (measured in hours of work) and capital (measured in hours of use of machinery and equipment). We assume that both labor and capital can be hired or rented in competitive markets. The price of labor is equal to the wage rate w, and the price of capital is equal to the rent for equipment r. We assume that capital is "rented" rather than purchased, and can therefore put all business decisions on a comparative basis. Since labor and capital are attracted competitively, we assume the price of these factors to be constant. We can then focus on the optimal combination of factors of production without worrying that large purchases will cause a jump in the prices of the factors of production used.

22 Determining Price and Output in a Competitive Industry and in a Pure Monopoly A pure monopoly promotes inequality in the distribution of income in society as a result of monopoly market power and charging higher prices at the same costs than in pure competition, which allows for monopoly profits. In conditions of market power, it is possible for a monopolist to use price discrimination, when different prices are set for different buyers. Many of the purely monopolistic firms are natural monopolies, which are subject to mandatory government regulation in accordance with antitrust laws. To study the case of a regulated monopoly, we use graphs of demand, marginal revenue and costs of a natural monopoly, which operates in an industry where positive economies of scale occur at all output volumes. The higher the firm's output, the lower its average ATC costs. Due to this change in average costs, the marginal costs of MC for all volumes of production will be lower than average costs. This is explained by the fact that, as we have established, the marginal cost graph intersects the average cost graph at the minimum point of the ATC, which is absent in this case. We show the determination of the optimal volume of production by a monopolist and possible methods of regulating it in Fig. Price, marginal revenue (marginal income) and costs of a regulated monopoly As can be seen from the graphs, if this natural monopoly were unregulated, then the monopolist, in accordance with the rule MR = MC and the demand curve for its products, chose the quantity of products Qm and the price Pm, which allowed to get maximum gross profit. However, the price Pm would exceed the socially optimal price. The socially optimal price is the price that ensures the most efficient allocation of resources in society. As we established earlier in topic 4, it must correspond to marginal cost (P = MC). In Fig. this is the price Po at the intersection point of the demand schedule D and the marginal cost curve MC (point O). The production volume at this price is Qо. However, if government agencies fixed the price at the level of the socially optimal price Po, this would lead the monopolist to losses, since the price Po does not cover the average gross costs of the vehicle. To solve this problem, the following main options for regulating a monopolist are possible: Allocation of state subsidies from the budget of the monopoly industry to cover the gross loss in the case of establishing a fixed price at the socially optimal level. Granting the monopoly industry the right to conduct price discrimination in order to obtain additional income from more solvent consumers to cover the monopolist's losses. Setting the regulated price at a level that ensures normal profits. In this case, the price is equal to the average gross cost. In the figure, this is the price Pn at the intersection point of the demand schedule D and the average gross cost curve of the ATC. The output at the regulated price Pn is equal to Qn. The price Pn allows the monopolist to recover all economic costs, including making a normal profit.

23. This principle is based on two main points. First, the firm must decide whether it will produce the product. It should be produced if the company can make either a profit or a loss that is less than fixed costs. Secondly, you need to decide how much of the product should be produced. This production volume must either maximize profits or minimize losses. This technique uses formulas (1.1) and (1.2). Next, you should produce such a volume of production Qj that maximizes profit R, i.e.: R(Q) ^max. The analytical determination of the optimal production volume is as follows: R, (Qj) = PMj Qj - (TFCj + UVCj QY). Let us equate the partial derivative with respect to Qj to zero: dR, (Q,) = 0 dQ, " (1.3) РМг - UVCj Y Qj-1 = 0. where Y is the coefficient of change in variable costs. The value of gross variable costs changes depending on the change in volume production. The increase in the amount of variable costs associated with an increase in production volume by one unit is not constant. It is assumed that variable costs increase at an increasing rate. This is due to the fact that constant resources are fixed, and in the process of production growth, variable resources increase. marginal productivity falls and, therefore, variable costs increase at an increasing pace. “To calculate variable costs, it is proposed to apply a formula, and based on the results of statistical analysis, it has been established that the coefficient of change in variable costs (Y) is limited to the interval 1.< Y < 1,5" . При Y = 1 переменные издержки растут линейно: TVCг = UVCjQY, г = ЇЯ (1.4) где TVCг - переменные издержки на производство продукции i-го вида. Из (1.3) получаем оптимальный объем производства товара i-го вида: 1 f РМг } Y-1 QOPt = v UVCjY , После этого сравнивается объем Qг с максимально возможным объемом производства Qjmax: Если Qг < Qjmax, то базовая цена Рг = РМг. Если Qг >Qjmax, then, if there is a production volume Qg at which: Rj(Qj) > 0, then Рg = PMh Rj(Qj)< 0, то возможны два варианта: отказ от производства i-го товара; установление Рг >RMg. The difference between this method and approach 1.2 is that here the optimal sales volume is determined at a given price. It is then also compared to the maximum "market" sales volume. The disadvantage of this method is the same as that of 1.2 - it does not take into account the entire possible composition of the enterprise’s products in conjunction with its technological capabilities.

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Classification of a company's costs in the short term.

When analyzing costs, it is necessary to distinguish costs for the entire output, i.e. general (full, total) production costs, and production costs per unit of production, i.e. average (unit) costs.

Considering the costs of the entire output, one can find that when the volume of production changes, the value of some types of costs does not change, while the value of other types of costs is variable.

Fixed costs(F.C. – fixed costs) are costs that do not depend on the volume of production. These include the cost of maintaining buildings, major repairs, administrative and management costs, rent, property insurance payments, and some types of taxes.

The concept of fixed costs can be illustrated in Fig. 5.1. Let us plot the quantity of products produced on the x-axis (Q), and on the ordinate - costs (WITH). Then the fixed cost schedule (FC) will be a straight line parallel to the x-axis. Even when the enterprise does not produce anything, the value of these costs is not zero.

Rice. 5.1. Fixed costs

Variable costs(V.C. – variable costs) are costs, the value of which varies depending on changes in production volumes. Variable costs include costs of raw materials, supplies, electricity, workers' compensation, and costs of auxiliary materials.

Variable costs increase or decrease in proportion to output (Fig. 5.2). In the initial stages of production

Rice. 5.2. Variable costs

production, they grow at a faster rate than manufactured products, but as optimal output is reached (at the point Q 1) the growth rate of variable costs is decreasing. In larger firms, the unit cost of producing a unit of output is lower due to increased production efficiency, ensured by a higher level of specialization of workers and more complete use of capital equipment, so the growth of variable costs becomes slower than the increase in output. Subsequently, when the enterprise exceeds its optimal size, the law of diminishing returns comes into play and variable costs again begin to outstrip production growth.

Law of Diminishing Marginal Productivity (Profitability) states that, starting from a certain point in time, each additional unit of a variable factor of production brings a smaller increase in total output than the previous one. This law takes place when any factor of production remains unchanged, for example, production technology or the size of the production territory, and is valid only for a short period of time, and not over a long period of human existence.

Let us explain the operation of the law using an example. Let's assume that the enterprise has a fixed amount of equipment and workers work in one shift. If an entrepreneur hires additional workers, work can be carried out in two shifts, which will lead to an increase in productivity and profitability. If the number of workers increases further, and workers begin to work in three shifts, then productivity and profitability will increase again. But if you continue to hire workers, there will be no increase in productivity. Such a constant factor as equipment has already exhausted its capabilities. The addition of additional variable resources (labor) to it will no longer give the same effect; on the contrary, starting from this moment, the costs per unit of output will increase.

The law of diminishing marginal productivity underlies the behavior of the profit-maximizing producer and determines the nature of the supply function on price (the supply curve).

It is important for an entrepreneur to know to what extent he can increase production volume so that variable costs do not become very large and do not exceed the profit margin. The differences between fixed and variable costs are significant. A manufacturer can control variable costs by changing the volume of output. Fixed costs must be paid regardless of production volume and are therefore beyond the control of management.

General costs(TS– total costs) is a set of fixed and variable costs of the company:

TC= F.C. + V.C..

Total costs are obtained by summing the fixed and variable cost curves. They repeat the configuration of the curve V.C., but are spaced from the origin by the amount F.C.(Fig. 5.3).

Rice. 5.3. General costs

For economic analysis, average costs are of particular interest.

Average costs is the cost per unit of production. The role of average costs in economic analysis is determined by the fact that, as a rule, the price of a product (service) is set per unit of production (per piece, kilogram, meter, etc.). Comparing average costs with price allows you to determine the amount of profit (or loss) per unit of product and decide on the feasibility of further production. Profit serves as a criterion for choosing the right strategy and tactics for a company.

The following types of average costs are distinguished:

Average fixed costs ( AFC – average fixed costs) – fixed costs per unit of production:

АFC= F.C. / Q.

As production volume increases, fixed costs are distributed over an increasing number of products, so that average fixed costs decrease (Figure 5.4);

Average variable costs ( AVC – average variable costs) – variable costs per unit of production:

AVC= V.C./ Q.

As production volume increases AVC first they fall, due to increasing marginal productivity (profitability) they reach their minimum, and then, under the influence of the law of diminishing returns, they begin to increase. So the curve AVC has an arched shape (see Fig. 5.4);

average total costs ( ATS – average total costs) – total costs per unit of production:

ATS= TS/ Q.

Average costs can also be obtained by adding average fixed and average variable costs:

ATC= A.F.C.+ AVC.

The dynamics of average total costs reflects the dynamics of average fixed and average variable costs. While both are decreasing, average total costs are falling, but when, as production volume increases, the growth of variable costs begins to outpace the decrease in fixed costs, average total costs begin to rise. Graphically, average costs are depicted by summing the curves of average fixed and average variable costs and have a U-shape (see Fig. 5.4).

Rice. 5.4. Production costs per unit of production:

MS – limit, AFC – average constants, АВС – average variables,

ATS – average total production costs

The concepts of total and average costs are not enough to analyze the behavior of a company. Therefore, economists use another type of cost - marginal.

Marginal cost(MS – marginal costs) are the costs associated with producing an additional unit of output.

The marginal cost category is of strategic importance because it allows you to show the costs that the company will have to incur if it produces one more unit of output or
save if production is reduced by this unit. In other words, marginal cost is a value that a firm can directly control.

Marginal costs are obtained as the difference between total production costs ( n+ 1) units and production costs n product units:

MS= TSn+1 – TSn or MS= D TS/D Q,

where D is a small change in something,

TS– total costs;

Q- volume of production.

Marginal costs are presented graphically in Figure 5.4.

Let us comment on the basic relationships between average and marginal costs.

1. Marginal costs ( MS) do not depend on fixed costs ( FC), since the latter do not depend on production volume, but MS- These are incremental costs.

2. While marginal costs are less than average ( MS< AC), the average cost curve has a negative slope. This means that producing an additional unit of output reduces average cost.

3. When marginal costs are equal to average ( MS = AC), this means that average costs have stopped decreasing, but have not yet begun to increase. This is the point of minimum average cost ( AC= min).

4. When marginal costs become greater than average costs ( MS> AC), the average cost curve slopes upward, indicating an increase in average costs as a result of producing an additional unit of output.

5. Curve MS intersects the average variable cost curve ( ABC) and average costs ( AC) at the points of their minimum values.

To calculate costs and evaluate the production activities of an enterprise in the West and in Russia, various methods are used. Our economy has widely used methods based on the category production costs, which includes the total costs of production and sales of products. To calculate the cost, costs are classified into direct, directly going towards the creation of a unit of goods, and indirect, necessary for the functioning of the company as a whole.

Based on the previously introduced concepts of costs, or costs, we can introduce the concept added value, which is obtained by subtracting variable costs from the total income or revenue of the enterprise. In other words, it consists of fixed costs and net profit. This indicator is important for assessing production efficiency.

The manual is presented on the website in an abbreviated version. This version does not include testing, only selected tasks and high-quality assignments are given, and theoretical materials are cut by 30%-50%. I use the full version of the manual in classes with my students. The content contained in this manual is copyrighted. Attempts to copy and use it without indicating links to the author will be prosecuted in accordance with the legislation of the Russian Federation and the policies of search engines (see provisions on the copyright policies of Yandex and Google).

10.11 Types of costs

When we looked at the periods of production of a company, we said that in the short term the company can not change all the factors of production used, while in the long term all factors are variable.

It is precisely these differences in the possibility of changing the volume of resources when changing production volumes that forced economists to divide all types of costs into two categories:

1. fixed costs;
2. variable costs.

Fixed costs(FC, fixed cost) are those costs that cannot be changed in the short term, and therefore they remain the same with small changes in the volume of production of goods or services. Fixed costs include, for example, rent for premises, costs associated with maintaining equipment, payments to repay previously received loans, as well as all kinds of administrative and other overhead costs. Let's say it is impossible to build a new oil refining plant within a month. Therefore, if next month an oil company plans to produce 5% more gasoline, then this is only possible on existing production facilities and with existing equipment. In this case, a 5% increase in output will not lead to an increase in the costs of servicing equipment and maintaining production facilities. These costs will remain constant. Only the amounts of wages paid, as well as the costs of materials and electricity (variable costs) will change.

The fixed cost graph is a horizontal line.

Average fixed costs (AFC, average fixed cost) are fixed costs per unit of output.

Variable costs(VC, variable cost) are those costs that can be changed in the short term, and therefore they grow (decrease) with any increase (decrease) in production volumes. This category includes costs for materials, energy, components, and wages.

Variable costs show the following dynamics depending on the volume of production: up to a certain point they increase at a killing pace, then they begin to increase at an increasing pace.

The variable cost schedule looks like this:

Average variable costs (AVC, average variable cost) are variable costs per unit of output.

The standard Average Variable Cost graph looks like a parabola.

The sum of fixed costs and variable costs is total costs (TC, total cost)

TC = VC + FC

Average total cost (AC, average cost) is the total cost per unit of production.

Also, average total costs are equal to the sum of average fixed and average variable costs.

AC = AFC + AVC

AC graph looks like a parabola

Marginal costs occupy a special place in economic analysis. Marginal cost is important because economic decisions typically involve marginal analysis of available alternatives.

Marginal cost (MC, marginal cost) is the increment in total costs when producing an additional unit of output.

Since fixed costs do not affect the increment in total costs, marginal costs are also an increment in variable costs when producing an additional unit of output.

As we have already said, formulas with derivatives in economic problems are used when smooth functions are given, from which it is possible to calculate derivatives. When we are given individual points (discrete case), then we should use formulas with increment ratios.

The marginal cost graph is also a parabola.

Let's plot the marginal cost graph together with the graphs of average variables and average total costs:

The above graph shows that AC always exceeds AVC since AC = AVC + AFC, but the distance between them decreases as Q increases (since AFC is a monotonically decreasing function).

The graph also shows that the MC graph intersects the AVC and AC graphs at their minimum points. To justify why this is so, it is enough to recall the relationship between average and maximum values ​​already familiar to us (from the “Products” section): when the maximum value is below the average, then the average value decreases with increasing volume. When the marginal value is higher than the average value, the average value increases with increasing volume. Thus, when the marginal value crosses the average value from bottom to top, the average value reaches a minimum.

Now let’s try to correlate the graphs of general, average, and maximum values:

These graphs show the following patterns.

At the center of the classification of costs is the relationship between production volume and costs, the price of a given type of goods. Costs are divided into independent and dependent on the volume of products produced.

Fixed costs do not depend on the volume of production; they exist even at zero production volume. These are the previous obligations of the enterprise (interest on loans, etc.), taxes, depreciation, security payments, rent, equipment maintenance costs with zero production volume, salaries of management personnel, etc. The concept of fixed costs can be illustrated in Fig. 1.

Rice. 1. Fixed costs Chuev I.N., Chechevitsyna L.N. Enterprise economy. - M.: ITK Dashkov and K - 2006. - 225 p.

Let us plot the quantity of output (Q) on the x-axis, and the costs (C) on the y-axis. Then the fixed cost line will be a constant parallel to the x-axis. It is designated FC. Since with an increase in production volume, fixed costs per unit of output decrease, the average fixed cost (AFC) curve has a negative slope (Fig. 2). Average fixed costs are calculated using the formula: AFC = FС/Q.

They depend on the quantity of products produced and consist of the costs of raw materials, materials, wages to workers, etc.

As optimal output volumes are achieved (at point Q1), the growth rate of variable costs decreases. However, further expansion of production leads to accelerated growth of variable costs (Fig. 3).

Rice. 3.

The sum of fixed and variable costs forms gross costs- the amount of cash costs for the production of a certain type of product.

The difference between fixed and variable costs is essential for every businessman. Variable costs are costs that an entrepreneur can control, the value of which can be changed over a short period of time by changing the volume of production. On the other hand, fixed costs are obviously under the control of the company's administration. Such costs are mandatory and must be paid regardless of the volume of production 11 See: McConnell K. R. Economics: principles, problems, policies / McConnell K. R., Brew L. V. In 2 volumes / Translated from English . 11th ed. - T. 2. - M.: Republic, - 1992, p. 51..

To measure the cost of producing a unit of output, the categories of average, average fixed and average variable costs are used. Average costs equal to the quotient of total costs divided by the quantity of products produced. determined by dividing fixed costs by the number of products produced.

Rice. 2.

Determined by dividing variable costs by production volume:

АВС = VC/Q

When the optimal production size is achieved, average variable costs become minimal (Fig. 4).

Rice. 4.

Average variable costs play an important role in the analysis of the economic state of the company: its equilibrium position and development prospects - expansion, reduction of production or exit from the industry.

General costs - the totality of a firm's fixed and variable costs ( TC = FC + VC).

Graphically, total costs are depicted as a result of the summation of fixed and variable cost curves (Fig. 5).

Average total costs are the quotient of total costs (TC) divided by production volume (Q). (Sometimes the average total costs of ATS in economic literature are denoted as AC):

AC (ATC) = TC/Q.

Average total costs can also be obtained by adding average fixed and average variable costs:

Rice. 5.

Graphically, average costs are depicted by summing the curves of average fixed and average variable costs and have a Y-shape (Fig. 6).

Rice. 6.

The role of average costs in a company's activities is determined by the fact that their comparison with the price allows one to determine the amount of profit, which is calculated as the difference between total revenue and total costs. This difference serves as a criterion for choosing the right strategy and tactics for the company.

The concepts of total and average costs are not enough to analyze the behavior of a company. Therefore, economists use another type of cost - marginal.

Marginal cost - This is the increment in the total cost of producing an additional unit of output.

The category of marginal costs is of strategic importance because it allows you to show the costs that the company will have to incur if it produces one more unit of output or save if it reduces production by this unit. In other words, marginal cost is the amount that a firm can control directly.

Marginal costs are obtained as the difference between production costs n + 1 units and production costs P units of product.

Since when output changes, fixed costs FV do not change, the change in marginal costs is determined only by the change in variable costs as a result of the release of an additional unit of output.

Graphically, marginal costs are depicted as follows (Fig. 7).

Rice. 7. Marginal and average costs Chuev I.N., Chechevitsyna L.N. Enterprise economy. - M.: ITK Dashkov and K - 2006. - 228 p.

Let us comment on the basic relationships between average and marginal costs.

The size of marginal and average costs are extremely important, since they primarily determine the firm's choice of production volume.

MS do not depend on FC , since FC do not depend on the volume of production, and MS are incremental costs.

As long as MC is less than AC, the average cost curve has a negative slope. This means that producing an additional unit of output reduces average cost.

When MC is equal to AC, this means that average costs have stopped decreasing, but have not yet begun to increase. This is the point of minimum average costs (AC = min).

5. When MC becomes larger than AC, the average cost curve goes up, indicating an increase in average costs as a result of producing an additional unit of output.

6. The MC curve intersects the AVC curve and the AC curve at the points of their minimum values ​​(Fig. 7).

Under average refers to the plant’s costs for the production and sale of a unit of goods. Highlight:

* average fixed costs A.F.C., which are calculated by dividing the firm's fixed costs by production volume;

* average variable costs AVC, calculated by dividing variable costs by production volume;

* average gross costs or the total cost of a unit of a vehicle product, which are determined as the sum of average variable and average fixed costs or as the quotient of dividing gross costs by output volume (their graphic expression is in Appendix 3).

* according to the methods of accounting and grouping costs, they are divided into simple(raw materials, materials, wages, wear and tear, energy, etc.) and complex, those. collected into groups either by functional role in the production process or by location of costs (shop expenses, factory overhead, etc.);

* the terms of use in production differ from daily, or current, costs and one-time, one-time costs incurred less than once a month and economic cost analysis uses marginal costs.

Average total cost (ATC) is the total cost per unit of output and is commonly used for comparison with price. They are defined as the quotient of total costs divided by the number of units produced:

TC = ATC / Q (2)

(AVC) is a measure of the cost of a variable factor per unit of output. They are defined as the quotient of gross variable costs divided by the number of units of production and are calculated using the formula:

AVC = VC / Q. (3)

Average fixed cost (AFC) is a measure of fixed costs per unit of output. They are calculated using the formula:

AFC=FC/Q. (4)

Graphic dependences of the values ​​of various types of average costs on the volume of output are presented in Fig. 2.

Rice. 2

From the data analysis in Fig. 2 we can draw conclusions:

1) the AFC value, which is the ratio of the constant FC to the variable Q (4), is a hyperbola on the graph, i.e. with an increase in production volume, the share of average fixed costs per unit of output decreases;

2) the AVC value is the ratio of two variables: VC and Q (3). However, variable costs (VC) are almost directly proportional to product output (since the more products planned to be produced, the higher the costs will be). Therefore, the dependence of AVC on Q (volume of products produced) looks like an almost straight line parallel to the x-axis;

3) ATC, which is the sum of AFC + AVC, looks like a hyperbolic curve on the graph, located almost parallel to the AFC line. Thus, as with AFC, the share of average total cost (ATC) per unit of output decreases as production volume increases.

Average total costs first decrease and then begin to increase. Moreover, the ATC and AVC curves are getting closer. This is because average fixed costs over the short run decrease as output increases. Consequently, the difference in the height of the ATC and AVC curves at a certain volume of production depends on the value of AFC.

In the specific practice of using cost calculation to analyze the activities of enterprises in Russia and in Western countries, there are both similarities and differences. The category is widely used in Russia cost price, representing the total costs of production and sales of products. Theoretically, the cost should include standard production costs, but in practice it includes excess consumption of raw materials, materials, etc. Cost is determined based on the addition of economic elements (costs that are homogeneous in terms of their economic purpose) or by summing up costing items that characterize the direct directions of certain expenses.

Both in the CIS and in Western countries, to calculate costs, a classification of direct and indirect costs (expenses) is used. Direct costs- These are the costs directly associated with the creation of a unit of goods. Indirect costs necessary for the overall implementation of the production process of this type of product at the enterprise. The general approach does not exclude differences in the specific classification of some articles.

Due to the volume of output, costs in the short term are divided into fixed and variable.

Constants do not depend on the volume of output (FC). These include: depreciation costs, wages for employees (as opposed to workers), advertising, rent, electricity bills, etc.

The variables depend on the volume of output (VC). For example, costs for materials, wages of main production workers, and others.

Fixed costs (costs) exist even with zero output (therefore they are never equal to zero). For example, regardless of whether the product is produced or not. You still need to pay rent for the premises. On the graph of the dependence of the value of costs (C) on the volume of production (Q), fixed costs (FC) look like a horizontal straight line, since they are not related to the manufactured products (Fig. 1).

Since variable costs (VC) depend on output, the more products are planned to be produced, the more costs need to be incurred for this. If nothing is produced, then there are no costs. Thus, the value of variable costs is in direct positive dependence on the volume of output and on the graph (see Fig. 1) represents a curve emerging from the origin.

The sum of fixed and variable costs is equal to total (gross) costs:

TC=FC+VC.(1)

Based on the above formula, on the graph the total cost (TC) curve is plotted parallel to the variable cost curve, but it does not start from zero, but from a point on the y-axis. the corresponding amount of fixed costs. We can also conclude that as production volume increases, total costs also increase proportionally (Fig. 1).

All types of costs considered (FC, VC and TC) relate to the entire output.

Rice. 1 Dependence of total costs (TC) on variable (VC) and fixed (FC).

Every organization strives to achieve maximum profit. Any production incurs costs for the purchase of factors of production. At the same time, the organization strives to achieve such a level that a given volume of production is provided at the lowest possible cost. The firm cannot influence the prices of resources. But, knowing the dependence of production volumes on the number of variable costs, costs can be calculated. Cost formulas will be presented below.

Types of costs

From an organizational point of view, expenses are divided into the following groups:

• individual (expenses of a particular enterprise) and social (costs of manufacturing a specific type of product incurred by the entire economy);
• alternative;
• production;
• are common.

The second group is further divided into several elements.

Total expenses

Before studying how costs and cost formulas are calculated, let's look at the basic terms.

Total costs (TC) are the total costs of producing a certain volume of products. In the short term, a number of factors (for example, capital) do not change, and some costs do not depend on output volumes. This is called total fixed costs (TFC). The amount of costs that changes with output is called total variable costs (TVC). How to calculate total costs? Formula:

Fixed costs, the calculation formula for which will be presented below, include: interest on loans, depreciation, insurance premiums, rent, wages. Even if the organization does not work, it must pay rent and loan debt. Variable expenses include salaries, costs of purchasing materials, paying for electricity, etc.

With an increase in output volumes, variable production costs, the calculation formulas for which were presented earlier:

• grow proportionally;
• slow down growth when reaching the maximum profitable production volume;
• resume growth due to violation of the optimal size of the enterprise.

Average expenses

Wanting to maximize profits, the organization seeks to reduce costs per unit of product. This ratio shows a parameter such as (ATC) average cost. Formula:

ATC = TC\Q.

ATC = AFC + AVC.

Marginal costs

The change in total costs when production volume increases or decreases by one unit shows marginal costs. Formula:

From an economic point of view, marginal costs are very important in determining the behavior of an organization in market conditions.

Relationship

Marginal cost must be less than total average cost (per unit). Failure to comply with this ratio indicates a violation of the optimal size of the enterprise. Average costs will change in the same way as marginal costs. It is impossible to constantly increase production volume. This is the law of diminishing returns. At a certain level, variable costs, the calculation formula for which was presented earlier, will reach their maximum. After this critical level, an increase in production volumes even by one will lead to an increase in all types of costs.

Example

Having information about the volume of production and the level of fixed costs, it is possible to calculate all existing types of costs.

Without engaging in production, the organization incurs fixed costs of 60 thousand rubles.

Variable costs are calculated using the formula: VC = TC - FC.

If the organization is not engaged in production, the amount of variable costs will be zero. With an increase in production by 1 piece, VC will be: 130 - 60 = 70 rubles, etc.

Marginal costs are calculated using the formula:

MC = ΔTC / 1 = ΔTC = TC(n) - TC(n-1).

The denominator of the fraction is 1, since each time the volume of production increases by 1 piece. All other costs are calculated using standard formulas.

Opportunity Cost

Accounting expenses are the cost of the resources used in their purchase prices. They are also called explicit. The amount of these costs can always be calculated and justified with a specific document. These include:

• salary;
• equipment rental costs;
• fare;
• payment for materials, bank services, etc.

Economic costs are the cost of other assets that could be obtained from alternative uses of resources. Economic costs = Explicit + Implicit costs. These two types of expenses most often do not coincide.

Implicit costs include payments that a firm could receive if it used its resources more profitably. If they were bought in a competitive market, their price would be the best among the alternatives. But pricing is influenced by the state and market imperfections. Therefore, the market price may not reflect the true cost of the resource and may be higher or lower than the opportunity cost. Let us analyze in more detail the economic costs and cost formulas.

Examples

An entrepreneur, working for himself, receives a certain profit from his activities. If the sum of all expenses incurred is higher than the income received, then the entrepreneur ultimately suffers a net loss. It, together with net profit, is recorded in documents and refers to explicit costs. If an entrepreneur worked from home and received an income that exceeded his net profit, then the difference between these values ​​would constitute implicit costs. For example, an entrepreneur receives a net profit of 15 thousand rubles, and if he were employed, he would have 20,000. In this case, there are implicit costs. Cost formulas:

NI = Salary - Net profit = 20 - 15 = 5 thousand rubles.

Another example: an organization uses in its activities premises that belong to it by right of ownership. Explicit expenses in this case include the amount of utility costs (for example, 2 thousand rubles). If the organization rented out this premises, it would receive an income of 2.5 thousand rubles. It is clear that in this case the company would also pay utility bills monthly. But she would also receive net income. There are implicit costs here. Cost formulas:

NI = Rent - Utilities = 2.5 - 2 = 0.5 thousand rubles.

Returnable and sunk costs

The cost for an organization to enter and exit a market is called sunk costs. No one will return the costs of registering an enterprise, obtaining a license, or paying for an advertising campaign, even if the company ceases operations. In a narrower sense, sunk costs include costs for resources that cannot be used in alternative ways, such as the purchase of specialized equipment. This category of expenses does not relate to economic costs and does not affect the current state of the company.

Costs and price

If the organization's average costs are equal to the market price, then the firm makes zero profit. If favorable conditions increase the price, the organization makes a profit. If the price corresponds to the minimum average costs, then the question arises about the feasibility of production. If the price does not cover even the minimum variable costs, then the losses from the liquidation of the company will be less than from its functioning.

International distribution of labor (IDL)

The world economy is based on MRT - the specialization of countries in the production of certain types of goods. This is the basis of any type of cooperation between all states of the world. The essence of MRI is revealed in its division and unification.

One production process cannot be divided into several separate ones. At the same time, such a division will make it possible to unite separate industries and territorial complexes and establish interconnections between countries. This is the essence of MRI. It is based on the economically advantageous specialization of individual countries in the production of certain types of goods and their exchange in quantitative and qualitative ratios.

Development factors

The following factors encourage countries to participate in MRI:

• Volume of the domestic market. Large countries have greater ability to find the necessary factors of production and less need to engage in international specialization. At the same time, market relations are developing, import purchases are compensated by export specialization.
• The lower the state's potential, the greater the need to participate in MRI.
• The country's high provision of monoresources (for example, oil) and low level of mineral resources encourage active participation in MRT.
• The greater the share of basic industries in the structure of the economy, the less the need for MRI.

Each participant finds economic benefit in the process itself.