QS Study

Difference between Marginal cost and Average Cost:

Marginal Cost

  • Marginal cost is the change in total cost when an additional unit of output is produced.
  • If Marginal cost (MC) is added with the total cost of pricing units we get total cost.
  • Marginal cost (MC) = Average Fixed Cost (AFC) + Marginal Variable Cost (MVC)
  • MC is lower than AC.
  • MC increases faster then AC.

Average Cost

  • Cost per unit of output is called average cost. It’s called unit cost.
  • Product of quality and average cost (AC) is equal to total cost.
  • Average cost (AC) = Average Fixed Cost (AFC) + Average Variable Cost (AVC)
  • AC is greater than MC
  • AC increases slower then MC.