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Asked: 2022-04-09T17:50:36+00:00 In:

Why is the supply curve referred to as a marginal cost curve?

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What is marginal cost? Why is the supply curve referred to as a marginal cost curve?

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Marginal Cost, commonly referred to by the name of marginal cost (MC) is a term used to refer to the price (AC) that a business producing an additional unit of a product (AK). Thus, margin cost (MC) is the sum of the level of price (AC) + additional production (AK). Marginal cost refers to the amount of expenses incurred for output from the company. We can observe that marginal cost fluctuates with the proportion of the amount of output and cost however, it’s not an absolute figure.

Supply curves are constructed upon the assumption that the company’s price of manufacturing doesn’t change. If the cost of production changes, the entire supply curve will change (this is assuming that the cost level remains constant). If the average cost decreases and the supply curve begins to become parallel towards the left. We can see an increment in amount offered at a certain price.

 

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    The marginal cost is simply the amount for one additional unit of any item. Since supply curves reveal the amount of each product at different prices, it will show the price of this additional unit. This is why the supply curve is known the marginal cost curve.

    for example:

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