Question

How does fixed cost affect marginal cost? Why is this relationship important?

Answer 1

There two important costs associated with the production and that are variable cost and the fixed cost, the fixed cost will remain constant at every production level. The variable costs varies with the output and the marginal costs occur only if there is variable costs in the production. That is suppose there is only fixed costs in the production there will not be any marginal costs. The marginal costs are those costs which is the change in the total cost when an additional unit of the commodity is produced. The marginal cost is independent of the output produced. The fixed costs will not affect the marginal costs, it is the variable costs that affects the marginal cost.

answered by: anonymous