Variable cost refers to the TOTAL variable cost of all units, whereas marginal cost is the variable cost of the last unit only. Variable cost is the sum of all the individual marginal costs. The derivative of the Variable Cost is the Marginal Cost. The integral of the Marginal cost is the Variable Cost.
If the marginal cost is less than the average variable cost, the average variable cost will decrease.
When average variable costs equal to the average marginal cost, the average variable cost will be at the minimum point. i.e. lowest cost
The marginal cost (MC) curve intersects the average variable cost (AVC) curve at the minimum point of the AVC curve.
decrease. Think about it this way, if you have a room full of people and you get their average height(average variable cost), and now each person that walks into the room(marginal cost) is shorter than the average, the average will drop.
Variable cost refers to the TOTAL variable cost of all units, whereas marginal cost is the variable cost of the last unit only. Variable cost is the sum of all the individual marginal costs. The derivative of the Variable Cost is the Marginal Cost. The integral of the Marginal cost is the Variable Cost.
If the marginal cost is less than the average variable cost, the average variable cost will decrease.
When average variable costs equal to the average marginal cost, the average variable cost will be at the minimum point. i.e. lowest cost
marginal cost, total cost, variable, and fixed cost
The marginal cost (MC) curve intersects the average variable cost (AVC) curve at the minimum point of the AVC curve.
decrease. Think about it this way, if you have a room full of people and you get their average height(average variable cost), and now each person that walks into the room(marginal cost) is shorter than the average, the average will drop.
yes
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.
It May Be Called as "Marginal Cost"
It May Be Called as "Marginal Cost"
Marginal cost curve above the average variable cost curve, is the same as the short run supply curve. In perfect competition, MC=Price. It follows that production will be at that point. Hence the supply curve is the same as that part of the MC curve which is above AVC, where the firm can cover its variable cost....this is better than shutting down.
we can subtract the AVC and we will get the MC