Marginal cost, Managerial Economics

Assignment Help:

Marginal Cost

This is the increase in total cost resulting from the production of an extra unit of output.  Thus, if TC is the total cost of producing n units of output and TCn-1  is the total cost of producing  n-1  units of output, then the marginal cost of producing the  'nth' of unit of output is calculated as:

     Marginal Cost = TCn  - TCn-1

   It will be observed that since fixed costs are fixed, it follows that:

  Marginal Cost = VC - VCn-1

Marginal Cost intersects the Average Total Cost at its lowest.   The MC is related to the AVC in the sense that when MC is below AVC, the AVC must declining with output.  When  MC is equal to AVC, the AC is at its  minimum.  When MC is above AVC, then Average Cost must be rising.  The AFC curve falls continuously and is asymptotic to both axes.  The AVC curve falls reaches a minimum, thereafter rises.  At its minimum, it's equal to MC.

As AFC curve approaches the horizontal axis asymptotically, then AVC approaches the ATC asymptotically.  ATC first declines, reaches a minimum then rises thereafter. At its minimum it is equal to the MC.

Thus, the Short Run Equilibrium Output of the firm is defined as that output at which AC is at its minimum i.e. when the cost of both inputs per unit of a product is smallest.  That level of output will be defined as the most efficient output of that particular plant because the plant is used efficiently.


Related Discussions:- Marginal cost

Ramsey pricing, explain in detail ramsey pricing with example?

explain in detail ramsey pricing with example?

Economies and diseconomies of scale, Economies and diseconomies of scale ar...

Economies and diseconomies of scale are of two types- external andinternal. Internal economies and diseconomies are those which a firm reaps as a result of its own expansion. Conve

Substitution effect on law of demand, Substitution Effect on law of demand ...

Substitution Effect on law of demand When price of a commodity falls it becomes comparatively cheaper if price of all other related goods, particularly of substitutes, remain c

Ab, isoquant and its properties

isoquant and its properties

Describe models of oligopoly, Question 1: (a) Describe the argument tha...

Question 1: (a) Describe the argument that market entry erodes profits in the long run. (b) Give some reasons and discuss possible strategies used for profits to persist eve

#title., #Plot the demand schedule and draw the demand curve for the data g...

#Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case above.question..

Salvatore, manual problems solution of demand theory

manual problems solution of demand theory

Theory of comparative advantage, THEORY OF COMPARATIVE ADVANTAGE In hi...

THEORY OF COMPARATIVE ADVANTAGE In his theory put forward in a book published in 1817, David Ricardo argued that what was needed for two countries to engage in international t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd