How Can I Find Out Marginal Cost In Simple Way ?


9 Answers

Liam Sheasby Profile
Liam Sheasby answered
Marginal cost can be worked out in a really simple way. Marginal cost equals the total cost divided by the change in quantity. To get the total cost you need to add the fixed costs and the variable costs together.

  • What is marginal cost?
Marginal cost is an economical and financial term. It is also known as 'choice cost', 'incremental cost', or 'differential cost'. It refers to the short-term variable cost of either increasing production of a unit - either in small or larger quantities - or due to an increase in the production costs due to a rise in the price of raw materials, or even due to a decline in demand. If the demand goes down your revenue decreases, yet you're still paying all your employees so you're operating at increased cost.

  • Can you give me an example?
Imagine that a factory is producing 100 toy cars. As it is a sizable order, and a specific figure, a bulk order fee can be worked out, as can the production costs in terms of material and labor. However, if you add an extra car on then that's not part of a bulk order; it's a separate production. That production will cost the normal rate to produce, not the discounted bulk order rate, and also mean that someone - or multiple staff - have to work a little extra, incurring overtime rates.

  • Why is marginal cost significant?
Marginal cost is significant because it's vital in relation to resource allocation. In order to balance the books correctly, and not overspend at a time of limited resources, the management - specifically those allocating funds - have to counter the marginal cost rises. These can be many, so they have to work out the correct ratio of funds to go where. A mistake in the calculations and it could see one area of the business under funded, or seemingly under-performing, or even worse see that area of the business cease productivity.
Aisha Profile
Aisha answered
Marginal cost refers to the cost that is associated with change in total cost as a result of increase of one unit in the quantity produced. The mathematical formula for finding marginal cost is as follows:

MC= dTC/dQ
where MC = Marginal cost,
dTC = is the change in total cost
dQ = is the change in total quantity
Anonymous Profile
Anonymous answered
Laura's internet services has the following short-run cost curve:  Where q is Laura's output level, K is the number of servers she leases and r is the lease rate of servers. Laura's short-run marginal cost function is:  Currently, Laura leases 8 servers, the lease rate of servers is $15, and Laura can sell all the output she produces for $500. Find Laura's short-run profit maximizing level of output. Calculate Laura's profits. If the lease rate of internet servers rise to $20, how does Laura's optimal output and profits change?
Katie Harry Profile
Katie Harry answered
Marginal Cost(MC) is the change in total cost resulting from a change in quantity by one unit. Written as a formula marginal cost is:

Marginal Cost=Change in total cost / Change in Quantity Demanded


Marginal Cost=d(TC)/dQ

Marginal Cost is the additional cost which is required to produce one extra unit of a product for example if producing ten more shoes requires hiring 2 more employees, the marginal cost of the ten more shoes would be the cost of hiring 2 more workers.
Zehra Kamal Profile
Zehra Kamal answered
Marginal cost is the cost a company or business has to pay on producing an extra unit of a good.
Alishan Samdani Profile
Alishan Samdani answered
Marginal cost is the addition cost incurred by the production of one additional unit. It is found out by calculating the derivative of the cost equation.
Anonymous Profile
Anonymous answered
If you have a cost function you take the derivative of the cost function to get the marginal cost. Also MC is equal to the price, which might be useful to know

Answer Question