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Marginal costs are not affected by the level of fixed cost. Marginal costs can be expressed as ∆C/∆Q. Since fixed costs do not vary with (depend on) changes in quantity, MC is ∆VC/∆Q. Thus if fixed cost were to double, the marginal cost MC would not be affected, and consequently, the profit-maximizing quantity and price would not change.
The goal of a firm is to maximize profits or minimize losses. The firm can achieve this goal by following two rules. First, the firm should operate, if at all, at the level of output where marginal revenue equals marginal cost. Second, the firm should shut down rather than operate if it can reduce losses by doing so. [1] [2]
The total cost curve, if non-linear, can represent increasing and diminishing marginal returns.. The short-run total cost (SRTC) and long-run total cost (LRTC) curves are increasing in the quantity of output produced because producing more output requires more labor usage in both the short and long runs, and because in the long run producing more output involves using more of the physical ...
Similarly, if the third kilogram of seeds yields only a quarter ton, then the marginal cost equals per quarter ton or per ton, and the average cost is per 7/4 tons, or /7 per ton of output. Thus, diminishing marginal returns imply increasing marginal costs and increasing average costs. Cost is measured in terms of opportunity cost. In this case ...
Diminishing marginal product ensures the rise in cost from producing an additional item (marginal cost) is always greater than the average variable (controllable) cost at that level of production. Since some costs cannot be controlled in the short run, the variable (controllable) costs will always be lower than the total costs in the short run.
When average cost is rising, marginal cost is greater than average cost. When average cost is neither rising nor falling (at a minimum or maximum), marginal cost equals average cost. Other special cases for average cost and marginal cost appear frequently: Constant marginal cost/high fixed costs: each additional unit of production is produced ...
The explicit costs are the wages and materials needed to fund soldiers and required equipment, whilst an implicit cost would the lost output as resources are direct from civilian to military tasks. Opportunity cost at a government level example. Another example of opportunity cost at government level is the effects of the Covid-19 pandemic.
At the highest level of generality, a marginal cost is a marginal opportunity cost. In most contexts, marginal cost refers to marginal pecuniary cost, that is to say marginal cost measured by forgone money. A thorough-going marginalism sees marginal cost as increasing under the law of diminishing marginal utility, because applying resources to ...