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

Commodity-related shortfalls in export earnings, A complementary facility f...

A complementary facility for commodity-related shortfalls in export earnings This is the most recent proposal of the Group of 77 at UNCTAD in June 1979.  There they requested

The individual and market demand curves, The individual and market demand c...

The individual and market demand curves The quantities and prices in the demand schedule can be plotted on a graph. Such a graph after the individual demand schedule is called

Governmental functions, a)  The most well-organized combination of resource...

a)  The most well-organized combination of resources which can be used to make a given level of output is that which:   b)  The enactment of a guaranteed yearly income for al

Illustrate the sources of monopoly, Q. Illustrate the sources of monopoly? ...

Q. Illustrate the sources of monopoly? Merger for Large-scale Production: Thirdly monopoly undertaking can be a consequence of the necessity to produce on a large scale to de

Nature and function of money, The nature and function of money The dev...

The nature and function of money The development of money was necessitated by specialization and exchange.  Money was needed to overcome the shortcomings and frustrations of t

What do you mean by kinked isoquant, Q. What do you mean by Kinked Isoquant...

Q. What do you mean by Kinked Isoquant? This isoquant presumes only limited substitutability of labour andcapital. There are just a few processes for generating any one commodi

Limitations, limitations of managerial ecomomics

limitations of managerial ecomomics

Economics homework, 1. A sporting goods company has hired a management cons...

1. A sporting goods company has hired a management consulting firm to analyze demand in 20 regional markets for one of its major products: a treadmill. The consultant uses data to

Average revenue (ar), Average Revenue (AR) This is the revenue per uni...

Average Revenue (AR) This is the revenue per unit of the commodity sold.  It is obtained by dividing Total Revenue by total quantity sold.  For a firm in a perfectly competiti

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