This video explains how average and marginal costs are calculated. Starting from fixed and variable costs, we analyse how average and marginal costs behave.
Average costs are those associated to one unit of production. Costs per unit grow quicker as production increases, so we find the arithmetic average as the sum of costs divided by the sum of production.
Marginal costs are also a very important concept in Economics because they show costs at a very specific point in time: they show the cost associated with producing one additional unit at any given production level.
Learn more by reading the dictionary entry.