Marginal cost is the additional cost incurred in the production of one more unit of a good or service. It is derived from the variable cost of production, given that fixed costs do not change as output changes, hence no additional fixed cost is incurred in producing another unit of a good or service once production has already started.
Total cost (£)
Marginal cost (£)
Marginal cost will tend to fall at first, but quickly rise as marginal returns to the variable factor inputs will start to diminish, which makes the marginal factors more expensive to employ. This is referred to as the ‘law of diminishing marginal returns’.
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). A firm will not supply below this point as it will not be covering its opportunity cost. Point B is also known as shut-down point. Point A represents break-even point.
The Growth of Tech Sector Economic Dominance The tech sector has been growing at an amazing rate over recent decades and has played a vital role in bolstering the economy of several world power countries. It ...
Hardest Hit Companies in the Travel & Entertainment Sector due to Covid-19 Coronavirus, declared by the World Health Organization as a global pandemic, has continued to rain havoc on people and businesses all over the ...
Cost Projections for Covid-19 Treatment in U.S Among the biggest issues that come with the novel coronavirus or COVID-19 pandemic is the impact it will make on the health care system. According to recent research published in Health Affairs, ...
Comparing Fiscal Responses to COVID-19 as Percentage of GDP across Countries Covid-19 has been the most dramatic financial event of our lives and so governments around the world have responded dramatically to this crisis. The ...
International Student College Enrollment Trends in the US International college students play a major part in our economy. According to a November 2019 article in Politico, during the 2018-2019 academic year alone international students added $41 ...
Cash On-Hand For FAANG Companies during Covid-19 Company cash on hand is one of the most important aspects of economics, especially for start-up businesses, and can be the reason for its success or failure. But ...