Micro Economics questions...?
A) Draw and explain marginal cost.
B) How is marginal cost and total variable cost related?
Answer:
Cant draw it on here.. but will try to explain.
You make one box, it costs you $5 to make... When you make a second box, it is cheaper to make. Lets say, $3 (supplies bought in bulk, labor hours, etc)
Marginal cost, is the CHANGE in total cost when one more unit is manufactured.
B. Some expenses are fixed (Rent, etc) and some are variable (labor hours, materials, etc)
Variable cost is the sum of all the marginal costs.
Hmmm..
Pr
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! ----X
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OUTPUT
Now put the nike swoosh inside the graph
Where the x is, point the short tip of the nike swoosh.
Where the y is, point the longer tip of the nike swoosh.
That is your marginal cost graph.
Phew. had to be imaginative there.
Marginal Cost is the cost of the next unit to be produced.
Variable Costs are expenses that proportionally changes depending on business activity.
so, Variable cost would be the sum of the marginal cost.
Total cost then would be fixed cost plus variable cost.
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