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Marginal Cost - Economics Concepts, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com
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FAQs on Marginal Cost - Economics Concepts, Business Economics & Finance Video Lecture - Business Economics & Finance - B Com
| 1. What is marginal cost in economics? |  |
Ans. Marginal cost refers to the additional cost incurred by producing one more unit of a good or service. It is calculated by dividing the change in total cost by the change in quantity produced. Marginal cost helps businesses determine the optimal level of production and pricing decisions.
| 2. How is marginal cost calculated? | |
Ans. To calculate marginal cost, you need to subtract the total cost of producing the previous quantity from the total cost of producing the current quantity. The formula for marginal cost is as follows:
Marginal Cost = (Change in Total Cost) / (Change in Quantity)
By analyzing the relationship between marginal cost and quantity, businesses can make informed decisions about production levels and pricing strategies.
| 3. Why is marginal cost important in business economics? | |
Ans. Marginal cost is an essential concept in business economics as it helps businesses determine the most efficient level of production. By comparing marginal cost with marginal revenue, businesses can identify the level of output that maximizes profits. Additionally, understanding marginal cost allows businesses to make informed pricing decisions and assess the impact of changes in production on their overall costs.
| 4. How does marginal cost affect pricing decisions? | |
Ans. Marginal cost plays a significant role in pricing decisions. When marginal cost is less than marginal revenue, it is usually advisable to increase production and lower prices to maximize profits. Conversely, if marginal cost exceeds marginal revenue, businesses may need to decrease production and increase prices. By considering the relationship between marginal cost and revenue, businesses can set prices that are optimal for their profitability.
| 5. What factors can influence marginal cost? | |
Ans. Several factors can influence marginal cost, including the cost of raw materials, labor costs, energy costs, technological advancements, and economies of scale. Changes in any of these factors can lead to fluctuations in the marginal cost of production. For example, if the cost of raw materials increases, the marginal cost will also increase. Similarly, if technological advancements reduce the labor required for production, the marginal cost may decrease.
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Dec 19, 2024 Last updated |
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