Marginal cost of productionis the change in total cost that comes from making or producing one additional item.

**. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .**

The purpuse

The Reason

- If the cost function is differentiable joining, the marginal cost is the cost of the next unit produced referring to the basic volume.
- If the cost function is not differentiable, the marginal cost can be expressed as follows

Factors

A number of other factors can affect marginal cost and its applicability to real world problems. Some of these may be considered market failures. These may include information asymmetries, the presence of negative or positive externalities, transaction costs, price discrimination and others.

Since (by definition) fixed costs do not vary with production quantity, it drops out of the equation when it is differentiated. The important conclusion is that marginal cost is not related to fixed costs. This can be compared with average total cost or ATC, which is the total cost divided by the number of units produced and does include fixed costs.

Marginal Cost of Production

The purpose of analyzing marginal cost is to determine at what point an organization can achieve economies of scale. The calculation is most often used among manufacturers as a means of isolating an optimum production

**. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .**

**. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .**

**. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .**

LOADING AWESOME

LOADING AWESOME

LOADING AWESOME

In the simplest case, the total cost function and its derivative are expressed as follows, where Q represents the production quantity, VC represents variable costs, FC represents fixed costs and TC represents total costs.

LOADING AWESOME

LOADING AWESOME

LOADING AWESOME

LOADING AWESOME