Question

Illustrate marginal cost through a numerical example.

Answer 1

Marginal cost refers to the increase in total cost when one additional unit of output is produced.

In simple terms, it is the extra cost of producing n units instead of (n–1) units, where n represents any given quantity.

Symbolically:

MC_n = TC_n – TC_n−1

Example:

If the total cost of producing 3 units is ₹60, and it rises to ₹80 when 4 units are produced, then the marginal cost of the 4th unit is
₹20 (i.e., ₹80 – ₹60 = ₹20).