Marginal Cost refers to the change in total cost due to production of one more or one less unit of output. Thus, if n units of goods are being produced we can calculate marginal cost as follows:
MC = TCn – TC(n – 1)
Thus, if n = 10 units MC = TC of 10 units minus TC of 10 – 1, i.e. 9 units.
When production changes not by single units of quantity (such as 9 units to 10 units) but by bulk of units such as shown in column 3 where output increases from 10 to 22 to 37 and so on till 80 units with successive increase in variable factor, the formula for calculating marginal cost is
MC = ∆ TC / ∆ Q
Where ∆ TC is the change in total cost and ∆Q is the change in total quantity of output.
SUBMIT ASSIGNMENT NOW!