Question

How to find the marginal cost

Answer 1

The marginal cost is calculated by dividing the change in total cost by the change in output and is crucial for firms to understand profitability on additional units produced. This concept is commonly applied in economics and business decision-making.

Step-by-step explanation:

To find the marginal cost, we must understand that it represents the change in total cost (or variable cost) that arises when the production output is increased by one unit. In simple terms, it is the cost of producing one additional unit of a good. We calculate marginal cost by dividing the change in total cost by the change in output. To do this, you need data on how total costs vary with production levels.

Here is a step-by-step approach:

1. Obtain the total cost for different levels of production. This data is usually provided or can be calculated based on cost information.
2. Identify the change in total cost when production is increased by one unit. This is found by subtracting the total cost at the previous production level from the total cost at the new level.
3. Then, identify the change in output, which should be one unit if we're looking for the marginal cost.
4. Finally, divide the change in total cost by the change in output to find the marginal cost.

A firm can use this information to determine if producing additional units is profitable by comparing the marginal cost to the additional revenue from selling another unit.

Answer 2

Marginal Cost=Change in Total Cost/Change in Total Quantity

Step-by-step explanation:

Marginal cost is calculated by dividing the change in total cost by the change in quantity. Let us say that Business A is producing 100 units at a cost of £100. The business then produces at additional 100 units at a cost of £90. So the marginal cost would be the change in total cost, which is £90. Divided by the change in quantity, which is the additional 100 units. That gives us: £90/100, which equals £0.90 per unit as the marginal cost.