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Marginal cost (MC)

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Marginal cost (MC)

Marginal cost is defined as the change in the total cost due to one additional unit of change in the output. In other words, it is the ratio of change in the total cost and change in the total output.
Symbolically;

MC=∆TC / ∆Q
OR
MC=TC n - TC n-1

Where;
MC = Marginal Cost
∆TC = Change in Total Cost
∆Q = Change in quantity sold
TC n = Current Total Cost
TC n-1 = Initial Total Cost
The concept of Marginal cost can be explained by the help of following schedule and diagram:

Output (Q)
TC
MC
0
30
30
1
50
20
2
60
10
3
75
15
4
110
35
5
175
65
MC-Curve
In the above figure, SMC or MC represents the short-run marginal cost curve. Up to the second unit of output it has declined to become minimum and rises thereafter. It is also ‘U’ shaped because of the operation of the law of variable proportion in the short run.

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