ECON 2J03 Lecture Notes - Lecture 3: Marginal Cost
Document Summary
Marginal cost (mc) and total cost: marginal costs measure the amount by which total costs increase as output is increased by one unit, total costs are the costs of producing the total amount of output. Example: apples: panel (a): marginal costs in terms of a stepped shaped relationship. Marginal costs are the height of each bar. It is the added costs when output is increased by one unit: total costs are the are under the mc curve. If five units are produced, total costs can be found by summing the bars up to the fifth unit in panel (a) or by adding areas a plus b in the panel (b) Supply curve: the marginal cost of production is a key factor in determining the supply behaviour of firms in competitive circumstances.