The 12th unit sees total cost rise from 1,700 to 2,400, so the marginal cost is 700.For example, the third unit sees TC increase from 450 to 500, therefore, the increase in MC is 50.To work out the marginal cost, you just see how much TC has increased by.Therefore the more you produce, the lower the average fixed costs will be. AFC (Average Fixed Cost) = Fixed cost / Quantity.AVC (Average Variable Cost) = Variable cost / Quantity.ATC (Average Total Cost) = Total Cost / quantity.Marginal cost always passes through the lowest point of the average cost curve. But, when marginal cost is above the average cost, then average cost starts to rise. Diagram of Marginal Costīecause the short run marginal cost curve is sloped like this, mathematically the average cost curve will be U shaped. Therefore, as you employ more workers the marginal cost increases. After a certain point, increasing extra workers leads to declining productivity. Short run cost curves tend to be U shaped because of diminishing returns. Average Total Cost ATC = Total cost / quantity.Total cost TC = Total variable cost (VC) + total fixed cost (FC).Average Variable Cost AVC = Total variable cost / quantity produced.Total variable cost (TVC) = cost involved in producing more units, which in this case is the cost of employing workers.Marginal cost (MC) – the cost of producing an extra unit of output.Total Fixed Cost (TFC) – costs independent of output, e.g.
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