Marginal and Average cost curves Flashcards
1
Q
What is marginal cost ?
A
The change in the total production costs that comes from making or providing one additional unit
2
Q
What are average costs ?
A
Total costs of production divided by the n.o goods produced
3
Q
Draw the Marginal cost and Average cost diagram
A
4
Q
Explain the 1st half of the MC and AC diagram
A
Marginal costs decrease as marginal product increases , this is due to the advantages of labour productivity of using up factor inputs , thus costs reduce
5
Q
Explain the 2nd half of the MC and AC diagram
A
Labour productivity decreases which reduces the amount of marginal product produced , marginal costs increase caused by the straining of fixed factors of production
