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CFA Level 1
Economics

Calculating Marginal Cost in Production

Easy Microeconomics Cost Of Production

In microeconomics, the cost of production plays a crucial role in determining the supply curve of a good or service. Consider a firm that operates in a perfectly competitive market. This firm has the option to produce either 100 units or 200 units of a good. The cost of production for these two output levels differs significantly due to fixed costs and variable costs.

If the firm decides to produce 100 units at a total cost of $500, and then increases its production to 200 units at a total cost of $900, how should the firm assess its marginal cost?

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