Capital Structure Interview Question:

Explain Average cost and Marginal cost?

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Average cost is also called as unit cost which is equal to the total cost divided by number of goods produced or also equal to the sum of average variable costs and the average fixed costs. This depends on the time period and also has the affect on the supply curve.

Marginal cost is the change in total cost which takes place when there is a change in quantity by one unit. It depends on the change in volume. It includes at each level of the production additional costs which is required to produce the next unit. For example building a building requires building the base then you require extra cost for space and other building material.
Submitted by: Administrator