Best Definition of Marginal Cost Marginal cost is the cost of producing one additional unit of a good or service. It is calculated by taking the change in total cost that results from producing one more unit of a good or service and dividing that by the change in the quantity of goods produced. In other words, it is the cost of producing one more unit of output. Marginal cost is an important concept in economics because it helps firms make decisions about how much of a good or service to produce and at what price to sell it. It is a crucial factor in determining the optimal level of production for a firm and is often used to set prices and make other business decisions.
What is marginal cost explain with an example?
Here is an example to illustrate the concept of marginal cost:
Suppose a firm produces widgets and the total cost of producing 1 widget is $10, while the total cost of producing 2 widgets is $20. The marginal cost of producing the second widget is $20 – $10 = $10.
In this example, the marginal cost of producing the second widget is $10, which is the cost of producing one additional widget. If the price at which the firm can sell the widget is greater than the marginal cost of producing it, then it makes economic sense for the firm to produce the widget. On the other hand, if the price at which the firm can sell the widget is less than the marginal cost of producing it, then it does not make economic sense for the firm to produce the widget.
I hope this helps! Let me know if you have any other questions.
What is marginal cost and why is it so important?
Marginal cost is the cost of producing one additional unit of a good or service. It is important because it helps firms make decisions about how much of a good or service to produce and at what price to sell it. In other words, it is a crucial factor in determining the optimal level of production for a firm and is often used to set prices and make other business decisions.
Here are a few reasons why marginal cost is so important:
1. Marginal cost helps firms determine the most cost-effective level of production. By considering the marginal cost of producing each additional unit of a good or service, firms can determine the point at which it is no longer profitable to produce more.
2. Marginal cost is a key factor in pricing decisions. If a firm can sell a product for a price that is greater than the marginal cost of producing it, then it makes economic sense for the firm to produce and sell the product.
3. Marginal cost is a key factor in the supply curve for a firm. The marginal cost of production determines the slope of the supply curve, which shows the relationship between the price of a good or service and the quantity of it that firms are willing and able to produce.
4. Marginal cost is important in understanding the behavior of firms in perfectly competitive markets. In these
5. markets, firms are price takers and cannot influence the market price of a good or service. As a result, they will produce at the quantity where the marginal cost of production is equal to the market price. I hope this helps! Let me know if you have any other questions.
What is a marginal cost in economics Quizlet?
According to Quizlet, the definition of marginal cost in economics is:
“The increase in total cost that results from producing one additional unit of a good or service.”
In other words, marginal cost is the cost of producing one more unit of output. It is calculated by taking the change in total cost that results from producing one more unit of a good or service and dividing that by the change in the quantity of goods produced. Marginal cost is an important concept in economics because it helps firms make decisions about how much of a good or service to produce and at what price to sell it. It is a crucial factor in determining the optimal level of production for a firm and is often used to set prices and make other business decisions.
