1.

Define marginal cost. With the help of an example, show how marginal cost can be obtained from the total cost.

Answer»

Marginal cost (MC) is an addition made to the total cost (TC) when output is change by one unit i.e.,

MC = ΔTC/Q 

MC = TCn – TCn-1

For example: the marginal cost of 4th unit is the changed in the total cost when output is increased from three units to four units (i.e. 192 – 162 = 30), as shown in the table given below.

Output UnitsTC (Rs)MC
120
23030 – 20 = 10
35050 – 30 = 20
48080 – 50 = 30



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