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explain the relationshipe between MC and AC with the help of a cost schedule and diagram....

 The relationship between marginal cost and average cost can be discussed as under
1) Marginal cost is less than average cost when average cost falls due to increase in output.
2) Marginal cost is equal to average cost when average cost is minimum. In this situation marginal cost curve intersect average cost curve at its minimum point.
3) Marginal cost is more than average cost when average cost rises.

 

Cost Schedule

Out put

Total cost

Marginal cost

Average cost

1

10

10

10

3

24

6

8

5

30

2

6

6

36

6

6

7

49

13

7

10

100

19

10

  • 2
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MC

AC

6

4

5

7

9

11

13

10

9

8

7

8

9

10

marginal cost is the net addition made to the total cost and average cost is the cost incurred per unit of output

here  mc and ac falls and then mc rises first and cuts ac at its minimum point(7) and then both ac and mc starts rising ac does not start rising at the same time when mc rises ac stars rising only after a point where mc = ac . ac falls for a longer period of time compared to the mc

  • 5

1. when AC is falling AC>MC

2.when AC is rising AC<MC

3.when AC is conatant AC =MC

4.Both AC and MC curves are U shaped

5.MC curve cuts AC curves at its lowest point.

  • -1
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