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COSTS

Statistics Directorate    
French Equivalent: Coûts

Definition:
Costs refer to the value in alternative uses of the factors of production used by a firm (labour costs, materials costs, capital costs). Costs may be fixed or variable.

Total costs refer to the sum of fixed and variable costs. Average costs refer to total costs divided by output. Marginal cost is the increment to total cost that results from producing an additional unit of output. Marginal cost is a function of variable costs alone, since fixed costs do not vary with increases in output.

Context:
Marginal cost has a particular importance in economic theory. The profit maximizing firms will always produce an output such that marginal cost equals marginal revenue.

Source Publication:
Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993.

Cross References:
Average costs
Fixed costs
Marginal cost
Revenues
Total costs
Variable costs

Hyperlink:
http://www.oecd.org/dataoecd/8/61/2376087.pdf

Statistical Theme: Financial statistics

Created on Thursday, January 03, 2002

Last updated on Friday, April 25, 2003