How To Draw Marginal Cost Curve

Now nosotros get into the near interesting and important cost curve, the Marginal Price Curve. It is the additional cost of producing one more than unit and later on will allow usa to maximize profits. Yeahoo! I honey profits $$$! As the production of pants increment, determining the boosted toll of producing one more than pant is crucial since that information will help us decide whether to produce or not that particular pair. In order to calculate the Marginal Cost we calculate the difference in Full Toll between the previous unit of measurement and the electric current unit. The table below calculates the Marginal Cost for Funky Pants:

Quantity Funky Pants	Full Cost	Marginal Cost

The calculations starting time with the first unit, as the toll went from $36 to $44, the marginal price of producing the get-go unit is $8 ($44-$36), for the 2nd unit the cost is $4, and and so on. The arrows illustrate that the marginal cost is the additional toll of producing one more unit. Suppose someone offers yous $25 for the 8 pair of pants, would you sell it at $25? How much did it cost you to sew that detail pair? ($17, so sell!) The graph below shows why the Marginal Cost is more challenging to understand, find that the coordinates are not exactly at one,2,3..units, they are graphed at 0.5,1.v,2.5, etc. This is because the MC starts increasing as you start producing the units. In this instance imagine you lot got your cloth and you add a zipper, costs have increased notwithstanding you are not finished with the pair of pants. In guild to reflect that graphically economists graph the MC at mid point to account for the transition. This is a bit confusing however useful in drawing accurate graphs and arriving at accurate conclusions!

margcostgraph

As mentioned higher up graphing the marginal cost accurately is very of import considering this volition help u.s.a. determine important stages in production costs:

the intersection of the Marginal Toll and the Average Total Price curves determines the everyman price of production
the intersection of the Marginal Cost and the Boilerplate Variable Toll curves determines the "shut-downwards" point of production

The graph below will alter to testify how the increase in Costs volition exist reflected in the graph – please movement your mouse over the image 🙂

When the additional cost of producing one more unit (Marginal Cost) reaches its lowest point, the Boilerplate Full Cost is at its lowest likewise, hence graphically the intersection of MC and ATC reflect the lowest toll per unit that may be achieved with the present production structure at Funky Pants. Equally stated earlier the intersection of MC and ATC reflect the lowest point of production, play blitheness.

Let's review a consummate set of numbers for the per unit cost of production:

FUNKY PANTS	Average Stock-still Cost (AFC)	Average Variable Cost (AVC)	Boilerplate Total Cost (ATC) = AFC+AVC	Marginal Toll (MC)

0	--	-	--	--
one	36	8	44	nine
2	18	six	24	4
iii	12	5	17	2
iv	ix	5	14	5
five	7.2	v.4	12.6	7
6	6	half dozen	12	9
7	5.fourteen	6.57	eleven.71	x
8	four.5	8.xiii	12.63	xix
9	4	10	14	25
10	3.six	13	16.6	40

mcandallavg The intersection of Marginal Cost and Average Full Price bend happens at 7 units, which tells us that the lowest cost of production is 7 pants, this would exist the almost efficient level of production at this stage of Funky Pants! Notice in the table $xi.71 is the lowest boilerplate cost of production at a level of seven units. This is a very important rule: the intersection of the marginal cost curve and average total cost bend correspond the lowest cost of product! Does this imply that we should stop production at this level to maximize profits? Not necessarily! This will be discussed in the profit maximization section of Microeconomics. Some other intersection that is very relevant for future discussions of profits is the intersection of Average Variable Cost and Marginal Toll Curves. Again this discussion will be expanded in the next section of Microeconomics!

Practice your knowledge of the Marginal Cost Curve:

1. If the Total Toll of producing 98 burgers at "Junk-in-the-Handbag" is $68, and the cost of producing 99 burgers is $68.95, what is the marginal cost of the 99th burger? Why?

2. Complete the table below:

Quantity of Snowfall Boards	Total Stock-still Cost	Full Variable Cost	Full Cost	Marginal Cost
0	$	0	$	--
ane	$	$ 78	$
2	$	$ 128	$
three	$	$ 150	$
4	$	$ 200	$
v	$	$ 259	$
6	$	$ 360	$
7	$	$ 480	$
8	$	$ 650	$
9	$	$ 900	$
10	$	$ ane,300	$

3. Graph the Marginal Toll from number ii above.

iv. Given the graph below, guess the lowest average full cost per unit of production and the number of units produced at this cost. Explain how you arrived at your answers.

costsunit Bully! You lot finished the Marginal Cost lesson!