Livestock Economics, Marketing and Business Management

Marginal cost

MARGINAL COST (MC)

• Marginal cost is the change in total cost in response to a unit increase in output.
• It is found out by dividing the change in total cost (or total variable cost, because total fixed cost is not going to change) by change in output.
• As output increases, Marginal cost first falls, reaches the minimum and then it slopes upwards and passes through average variable cost and average cost at their minimum points.
• In other words, average variable cost and average cost will slope downwards and keep falling as long as the marginal cost is below them.

MC = ∆ TC/∆ Y