Marginal Cost, Average Variable Cost and Average Fixed Cost

Glossary:

• marginal cost
  Addition to total cost arising from producing one more unit or taking one more step. In the short run with fixed cost, these additions consist of entirely variable costs. When total variable cost increases at an increasing rate, marginal cost will increase. Under diminishing returns, marginal cost will be higher than average cost if average cost is rising and marginal cost will be lower than average cost if average cost is falling.
  

Topics:

Costs and opportunities

Keywords

AFC, AVC, average fixed cost, average variable cost, law of diminishing returns, marginal cost, MC