What is the relation among Average Cost, Marginal Cost, and Total Cost?
Answer (1)
16th Oct, 2021
The total cost is equal to the sum of fixed cost and all the marginal costs uncured. For example, at an output of 5 units, the total cost is initial cost to which the firm is committed irrespective of the quantity produced.
Where marginal cost falls, total cost will be rise at a declining rate; on the other hand, where marginal cost is rises, total cost will rise at an increasing rate.
When marginal cost is lower than the average cost, average cost will fall; for example, up to 12 units of output as shown in Table 3.1. This will be so irrespective of the fact whether the marginal cost is rising or falling. For example, for an output of 11 and 12 units, the marginal cost rises, but the average cost falls.
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