Question

Marginal Cost is a variable cost Why?

Answer 1

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Variable costs are expenses related to business activity and change in proportion to an increase or decrease in this activity.___________________________ Marginal cost is the change in total cost that arises when the quantity of goods produced increases by one unit.________________ It is a measure of the cost of producing one additional unit.


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Answer 2

A variable cost is a cost that varies with the quantity produced. If a piece of jewelry is hand made it's cost typically is fixed to the time and materials to produce it. However, if certain aspects of production are automated, the investment of equipment may lower costs. Thus the cost reduction of automation varies with the amount produced.

Increasing production in such a scenario reduces marginal cost. By introducing automation that lowers unit cost net of investment the cost of additional production is reduced marginally.

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