why does marginal cost increase Marginal cost is an important factor in economic theory because a company that is looking to maximize its profits will produce up to the point where marginal cost MC equals
The marginal cost of production is an economic concept that describes the increase in total production cost when producing one more unit of a good It is highly useful to decision making in that it allows firms to understand what level of production will allow them to have economies of scale In economics the marginal cost is the change in the total cost that arises when the quantity produced is increased i e the cost of producing additional quantity 1 In some contexts it refers to an increment of one unit of output and in others it refers to the rate of change of total cost as output is increased by an infinitesimal amount
why does marginal cost increase
why does marginal cost increase
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Marginal Cost is the increase in cost caused by producing one more unit of the good The Marginal Cost curve is U shaped because initially when a firm increases its output total costs as well as variable costs start to increase at a diminishing rate The marginal cost curve is generally upward sloping because diminishing marginal returns implies that additional units are more costly to produce We can see small range of increasing marginal returns in the figure as a dip in the marginal cost curve before it starts rising
When marginal cost is greater than average variable cost average variable cost is increasing In some cases this also means that average variable cost takes on a U shape though this is not guaranteed since neither average variable cost nor marginal cost contains a The marginal cost of production is used to measure the change in the cost of a product resulting from the production of an extra unit of output When the company reaches the optimum production level producing additional units will increase the cost of production per unit
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Explain and illustrate how the product and cost curves are related to each other and to determine in what ranges on these curves marginal returns are increasing diminishing or negative Our analysis of production and cost begins with a period economists call the short run Marginal cost is significant in economic theory because a profit maximising firm will produce up to the point where marginal cost MC equals marginal revenue MR Also a firm s supply curve is effectively the part of the MC curve above average variable costs from point B upwards on the diagram below
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