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Marginal cost = derivative of (Total cost/Quantity)
Where Total cost = fixed cost + variable cost
Marginal cost = derivative (Variable cost/Quantity) (by definition, fixed costs do not vary with quantity produced)
Average cost = Total cost/Quantity
The rate of change of average cost is equivalent to its derivative.
Thus,
AC' = derivative(Total cost/Quantity) => derivative (Variable cost/Quantity) = MC.
So, when MC is increasing, AC' is increasing. That is, when marginal cost increases, the rate of change of average cost must increase, so average cost is always increasing when marginal cost is increasing.
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What are benefits of marginal costing?
Marginal cost is the extra cost incurred in producing one unit of a product.If the marginal cost is more than average cost that means that costs are increasing and if it is less it means costs are decreasing.This way we find out how are business is progressing.
What is the difference between opportunity cost and marginal cost?
opportunity cost refers to the satisfaction of ones want at the expense of another want while marginal cost is the addition to total cost as a result of increasing output by one unit.
If marginal revenue is greater than marginal cost the firm should?
If MR is greater than MC, the firm should increase their production. The ideal amount of production is determined by allowing the marginal cost to equal the marginal revenue.
When marginal revenue equal to marginal cost?
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
What is the Importance of marginal costing in decision making?
Marginal cost is change in total cost due to increase or decrease one unit or output. It is technique to show the effect on net profit if we classified total cost in variable cost and fixed cost.
If average total cost is greater than marginal cost average total cost must be increasing is the true or false?
true
How do you find marginal average cost?
Marginal cost comes from the costs of producing just one more of something.
What are benefits of marginal costing?
Marginal cost is the extra cost incurred in producing one unit of a product.If the marginal cost is more than average cost that means that costs are increasing and if it is less it means costs are decreasing.This way we find out how are business is progressing.
If average cost increases does marginal cost increase?
It depends if the increase in Average Cost is caused by an increase in Fixed Costs or an increase in Variable Costs. An increase in Fixed Costs will not increase MC, because FCs do not vary with output (by definition) And increase in Variable Costs will increase MC
What Relation between marginal cost and average cost?
relation ship between average cost and marginal cost
When a firm's marginal revenues are higher than its marginal cost?
Marginal cost is
Does marginal cost curve always intersect the average cost curve at the average cost curve's lowest point?
When the marginal cost is below the average total costs or the average variable costs,then the AC would be declining.When marginal cost is above the average cost then the average cost would be increasing.Therefore the marginal cost should intersect with the average cost at the lowest point in order to pull the average cost upwards.
What happens to marginal cost after the point where it equals average variable cost?
Marginal Cost will keep increasing (have upward slope) because of the principle of diminishing marginal returns. The MC curve above the its intersection with AVC is the Supply Curve *because below minimum AVC, the firms stops production)
What should a monopoly do if marginal revenue exceeds marginal cost?
increase output
When marginal cost is less than the average total cost the average total cost is falling why?
as a marginal cost is the cost of the next product produced, if this is less than average cost, when you continue to produce more products the lower marginal cost will have an affect on the average and cause it to fall.
6 If the average total cost curve is falling what is necessarily true of the marginal cost curve If the average total cost curve is rising what is necessarily true of the marginal cost curve?
When average total cost curve is falling it is necessarily above the marginal cost curve. If the average total cost curve is rising, it is necessarily below the marginal cost curve.
Equation for marginal cost and average cost?
Marginal cost - the derivative of the cost function with respect to quantity. Average cost - the cost function divided by quantity (q).
