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11. Define the Marginal Cost, Average Total cost, Average Variable cost, Average fixed cost?

11. Define the Marginal Cost, Average Total cost, Average Variable cost, Average fixed cost?

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Answer #1

a) Marginal cost can be defined as the change in the total cost with an extra quantity produced, i.e. the extra cost the firm has to bear to produce on extra unit produced.

It is change in the total cost / change in total quantity.

b) Average total cost is the total cost of the firm divided by the total quantity produced. It is the amount the firm used to produced each good.

c) Average variable cost is the total variable cost the firm used to produce each good. That is total variable cost divided by the total good produced.

d) Average fixed cost is the total fixed cost divided by total quantity produced, it will be the share of fixed cost the firm has used in the production of each good.

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