Question
What is the relationship between total variable cost and marginal cost? Explain.
✓
Answer
Marginal cost is the slope of the total variable cost curve. It's relationship is as given:
- When Marginal Cost falls, Total Variable Cost increases at a diminishing rate.
- When Marginal Cost is minimum (at point P), Total Variable Cost is at its inflexion point (at point P1).
- When Marginal Cost rises, Total Variable Cost increases at an increasing rate.
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Complete the following table:
|
Output (Units)
|
Total Cost (₹)
|
Avarage Variable Cost (₹)
|
Marginal Cost (₹)
|
Average Fixed Cost (₹)
|
|
0
|
30
|
|
|
|
|
1
|
-
|
-
|
20
|
-
|
|
2
|
68
|
-
|
-
|
-
|
|
3
|
84
|
18
|
-
|
-
|
|
4
|
-
|
-
|
18
|
-
|
|
5
|
125
|
19
|
-
|
6
|