20.3.3. Marginal Cost

Try these first

1. 1.

   What is marginal cost?

   Hint

   Think about how costs change with production.

2. 2.

   If producing 10 units costs ₹500 and 11 units cost ₹530, what is the marginal cost?

   Hint

   Subtract the total costs.

3. 3.

   What does marginal cost refer to?

   • Total cost of production
   • Cost of producing one additional unit
   • Cost reduction strategy

   Hint

   Focus on the 'additional' aspect.

4. 4.

   True or False: A company should produce more units if the marginal cost is less than the selling price.

   • True
   • False

   Hint

   Think about profit margins!

5. 5.

   A tech company produces gadgets with a total cost structure defined as Fixed Costs of ₹30,000 and Variable Costs of ₹200 per gadget. What should be the marginal cost if they increase production from 500 to 505 gadgets?

   Hint

   Identify which costs come into play with increased production.

6. 6.

   Evaluate a situation where due to market changes, the marginal cost of producing additional units has doubled while the selling price remained the same. What implications does this have for the business strategy?

   Hint

   Think about how pricing and costs interact.