How can marginal cost be expressed mathematically

The marginal cost does increase and decrease. This concept is called economies of scale; in this case, economies of production.

When you are producing more, producing an additional unit is cheaper than when you are producing less. In other words, there is a certain level of production x at which the cost of producing one additional product is as low as possible.

In the example above, this happens when. At a production level of units, the marginal costs is at its minimum. Meaning that producing one additional product costs more than it did previously. This ultimately results in less profit. You must be logged in to post a comment. The Big Idea: Marginal Cost- Derivatives in Economics In economics, derivatives are applied when determining the quantity of the good or service that a company should produce.

AR q is the slope of the line from 0, 0 to q, TR q. How could you distinguish between TC and TC ? On this graph, that interval is too small to see, and our best guess at the secant line is actually the tangent line to the TC curve at that point.

This is the reason we want to have the derivative definition handy. Profit is the distance between the TR and TC curve. Skip to main content. Revenue and Profit. Search for:. Your cost is the money you have to spend to produce your items. The Fixed Cost FC is the amount of money you have to spend regardless of how many items you produce. FC can include things like rent, purchase costs of machinery, and salaries for office staff.

TVC includes things like the materials you use, the electricity to run the machinery, gasoline for your delivery vans, maybe the wages of your production workers. These costs will vary according to how many items you produce. The Total Cost TC for q items is the total cost of producing them. The Marginal Cost MC at q items is the cost of producing the next item.

In this course, we will use both of these definitions as if they were interchangeable. Demand is the functional relationship between the price p and the quantity q that can be sold that is demanded.