• Costs can have different meanings in the field of economics.corporate greed image by Steve Johnson from Fotolia.com
  
  When economists discuss costs, they reference more than just the price tag of a good or service. Costs are categorized to assess separate aspects of production. Sometimes, the cost of an item changes depending on how it’s calculated, as is the case for average and variable costs. In other cases, a cost is not a dollar figure, but an intangible measurement like an experience.
  
  

Opportunity Cost

• Economists are often asked to calculate the “opportunity cost” of a plan. This economic cost is one of the few types that involve calculating both quantitative and qualitative items. Investopedia.com defines an opportunity cost as anything you forgo in pursuit of a plan. For instance, if asked to calculate the opportunity cost of going to college, a person might list work experience, money gained from full-time employment and time spent with friends. Opportunity costs are always mutually exclusive to the course of action. For instance, if you know you can work full time while going to school, it is not an opportunity cost.
  
  

Average Cost

• The average cost is calculated by taking the total cost of producing the goods and dividing it by the number of units produced. Let’s say you are a chef commissioned by a company to make 200 plated meals for a wedding. You took six hours to make the meals at $15 an hour and the company spent $500 in ingredients. The total cost of $590 divided by 200 meals means the average cost per dish is $2.95.
  
  

Marginal Cost

• William Boyes and Michael Melvin, authors of the textbook “Microeconomics,” explains that the marginal cost is the price of producing one more unit of a good. This differs from the average cost, which attributes the same price for every unit along the production line. The marginal cost tends to get lower over time as a company achieves greater efficiency.
  
  For example, if you are commissioned to make 50 pairs of the same earrings, you probably take a while producing the first pair as you get the hang of mastering the design and using the tools. At this stage, your labor costs are high. By the 50th pair, however, you’re a pro and can make the earrings in far less time than you could on the first. Thus, the marginal cost of producing that last pair of earrings is less than the marginal cost of making the first pair.
  
  

Fixed Cost

• The fixed cost is an expense that does not change (in the short-run) regardless of how many units are produced. Rent and utilities are good examples of fixed costs: no matter how much business enters the office, the same amount of rent is due at the end of every month. Insurance is a third primary example. On a graph, the line for fixed costs is horizontal.
  
  

Variable Costs

• A variable cost is an expense tied directly to the cost of producing a good. Examples include packaging, ingredients, per-hour labor pay and shipping cost. The more items produced, the more you must pay in variable costs. On a graph, the line of variable costs is an upward-sloping curve.