Copyright © Texas Education Agency, 2011. All rights reserved.
“Copyright and Terms of Service
Copyright © Texas Education Agency. The materials found on this website are copyrighted © and trademarked ™ as
the property of the Texas Education Agency and may not be reproduced without the express written permission of the
Texas Education Agency, except under the following conditions:
1) Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the
Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from the
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2) Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual
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Copyright Texas Education Agency, 2011. All rights reserved.
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What kind of costs should organizations consider?

When can profit be maximized?

Is there a point at which it is not cost effective to
hire one additional person?
Copyright © Texas Education Agency, 2011. All rights reserved.
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The cost of operating a facility such as a store or
facility
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A cost that does not change, no matter how much of
a good is produced

Costs that rise or fall depending on the quantity
produced
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Fixed costs and variable costs added together
TC = FC + VC
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The change in output from hiring one more worker
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A level of production in which product of labor
decreases as the number of workers increases

A level of production in which the marginal product
of labor increases as the number of workers
increases
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The additional cost of producing one more unit
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The additional income from selling one more unit of
a good
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Marginal Costs (MC) = Marginal Revenue (MR)
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reserved.
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
Provide examples of fixed costs.

Provide examples of variable costs.

When is a producer’s profit maximized?

What causes diminishing marginal returns?

Why are some employees considered variable costs
while others are considered fixed costs?
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reserved.
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