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.