Marginal cost
= Change in total cost/ Change in units of factors of production
= 800 - 400/20-10
=400/10
= 40

The Marginal Cost

To find the marginal cost, we need to understand the concept of marginal cost first. Marginal cost refers to the cost of producing one additional unit of a product or service. It is calculated by taking the difference between the total cost of producing a certain number of units and the total cost of producing one fewer unit.

Given Information

- Total cost for 10 units = Rs. 400
- Total cost for 20 units = Rs. 800

Calculating the Marginal Cost

To calculate the marginal cost, we can use the formula:

Marginal Cost = (Total Cost of n units - Total Cost of (n-1) units) / (n - (n-1))

In this case, let's calculate the marginal cost for 20 units:

Marginal Cost = (Total Cost for 20 units - Total Cost for 19 units) / (20 - 19)

Now, let's substitute the given values into the formula:

Marginal Cost = (Rs. 800 - Total Cost for 19 units) / (20 - 19)

Since we know the total cost for 10 units is Rs. 400, we can substitute it into the equation:

Marginal Cost = (Rs. 800 - Rs. 400) / (20 - 19)

Simplifying the equation:

Marginal Cost = Rs. 400 / 1

Therefore, the marginal cost for producing one additional unit is Rs. 400.

Explanation

The marginal cost is the additional cost incurred when producing one more unit. In this case, the total cost increased by Rs. 400 when going from 10 units to 20 units. Therefore, the marginal cost is Rs. 400.

It's important to note that marginal cost can vary depending on factors such as economies of scale, production efficiency, and input costs. In this case, the marginal cost remains constant as the total cost increases linearly with the number of units produced.

Understanding the concept of marginal cost is crucial for businesses as it helps in making informed decisions regarding production levels, pricing, and resource allocation. By analyzing the marginal cost, businesses can determine the optimal level of production to maximize profits and minimize costs.