1. Costs of Production If you own your own business, there will be many different types of costs for your business. Usually, businesses believe costs are too ________ and they try to ___________ them. Businesses must figure out much each unit they produce will ____________ them, and then use this to set ___________.

2. All these costs go into a business’ decision on how they manage their ________________. The greatest expense for any business is _________________. Vocabulary Alert! Question: What is the different b/w a wage and salary? Question: What is the difference b/w a skilled and unskilled worker? Question: What is the difference between a blue collar and white collar worker?

3. Fixed Costs, Variable Costs, and Total Costs Fixed costs are those that are spent and do not usually ___________in a period of time. Anything that has to be paid regardless of whether or not the company is _________________ their good or service. * In the long run there are no “true” fixed costs since all costs change over time. Give examples: What are some examples of fixed costs in a lemonade producing business?

4. Fixed Costs, Variable Costs, and Total Costs Variable costs – _______________ (or vary) with the amount of output being produced. Question: If you had a lemonade producing business, what are some of the variable costs you might have to increase or decrease depending on how much lemonade you sell?

5. Fixed Costs, Variable Costs, and Total Costs The sum of the variable and fixed costs are total costs. Formula:

6. Marginal Cost Important! In deciding how many units to produce, the most important variable is _________________________cost. Marginal cost is the increase (or decrease) in total cost of increasing (or decreasing) the level of output by one unit. Question: If it costs $1,500 to produce 30 bicycle helmets and $1550 to produce 31 bicycle helmets, what is the marginal cost of the 31 st bicycle helmet? Formula: