Introduction

After you have worked through this section of the learning unit, you should be able to:

  • present marginal cost with the aid of a diagram

Based on the data for Best Barber, we can now draw the marginal cost curve.

The marginal cost is measured on the vertical axis,while the quantity of haircuts is measured on the horizontal axis.

Marginal cost for Best Barber

Quantity of labour

 

 Quantity of haircuts

 

 Total cost

(TC)

(rand)

 Marginal cost

(MC)

(rand)
0 0 320 ---
1 16 480 10,00
2 40 640 6,67
3 60 800 8,00
4 72 960 13,33
5 80 1 120 20,00
6 84 1 280 40,00

Joining the points gives us the marginal cost curve.

To summarise:

As total product increases, marginal cost first decreases, reaches a minimum and then increases.

Activity

Now do the following activity to see if you understand the marginal cost curve:

The following diagram represents the marginal cost for Blaker Maker:

1. Until what unit of production does the marginal cost decrease?

2. At what output level is the marginal cost the lowest?

3. As Blaker Maker increases production from 5 000 to 6 000 to 7 000, marginal cost increases. This increase in marginal cost is by ________.

  1. lower amounts
  2. higher amounts
  3. the same amounts
Click to Show Answer

1. It is at 3 000 ornaments.

2. It is at 3 000 ornaments.

3. Marginal cost increases by higher amounts.