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Chapter 7: Q32 (page 185)

How does Fixed Cost effect Marginal Cost ? Why is this relationship important ?

Short Answer

Expert verified

Fixed Cost doesn't effect Marginal Cost.

Step by step solution

01

TFC Definition

Total Fixed Cost is the cost incurred on fixed factors of production. It stays same (constant) at all of levels of output.

02

MC Definition

Marginal Cost is the additional cost incurred, when an additional unit of output is produced.

03

Relationship Explanation

MC is the difference between TC at nth level of output and at (n-1) th level of output.
However, TC changes only due to change in Variable Costs and not Fixed Costs, as latter are constant.

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Most popular questions from this chapter

Compute the average total cost, average variable cost, and marginal cost of producing $60$ and $72$ haircuts. Draw the graph of the three curves between $60$ and $72$ haircuts.

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The WipeOut Ski Company manufactures skis for beginners. Fixed costs are $\(30$ .Fill in Table 7.16 for total cost, average variable cost, average total cost, and marginal cost.

Quantity	Variable Cost	Fixed Cost	Total Cost	Average Variable Cost	Average Total Cost	Marginal Cost
$0$	$0$	$\) 30$
$1$	$\(10$	$\) 30$
$2$	$\(25$	$\) 30$
$3$	$\(45$	$\) 30$
$4$	$\(70$	$\) 30$
$5$	$\(100$	$\) 30$
$6$	$\(135$	$\) 30$

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