(Since LRAC=LRTC is equal to SRTC). 48) Refer to the above figure. The difference between the population mean and the sample mean is called the _____. quick Flashcards | Quizlet The average total cost, on the other hand, is calculated by dividing the total cost by the output or quantity of goods that have been produced. In the long run, constant returns to scale necessarily occur when the firm increases its production and the firm's. The figure above shows some of a firm's cost curves. Answered: The average variable cost curve and | bartleby When the average total cost curve is rising, the marginal cost curve will be Below the average total cost curve. Total Cost. Long-run average total cost curve (video) | Khan Academy In a free market economy, productively efficient firms use these curves to find the optimal point of production, where they make the most profits. Average variable cost (AVC) is the variable cost per unit of total product (TP). Marginal cost is somewhat different. In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. TR < implicit + explicit then you shouldn't do it and skip it!! The nature of short period Average Cost Curve is 'U' shaped. This does not hold for average fixed cost. A. average total. d. where the most profitable level of output occurs. So it is not the cost per unit of all units being produced, but only the next one (or next few). shifting cost curves: what if costs for variable resources increases? These new measures analyze costs on a per-unit (rather than a total) basis. As output increases, economies of scale occur when the. The marginal cost equals average variable cost when the average variable cost is at its minimum. What is the definition of average variable cost quizlet? Where does the marginal cost curve intersect the average - Quizlet Do you know why not? Why total variable cost matters First, we use it in the breakeven analysis. A list of the costs involved in producing cars will look very different from the costs involved in producing computer software or haircuts or fast-food meals. Incremental cost is the change in fixed costs associ Variable costs are those costs which vary with output. If you graphed both total and average cost on the same axes, the average cost would hardly show. Since the total cost of producing 40 haircuts at The Clip Joint is $320, the average total cost for producing each of 40 haircuts is $320/40, or $8 per haircut. Average cost - Wikipedia What is the definition of marginal cost quizlet? The point of transition, between where MC is pulling ATC down and where it is pulling it up, must occur at the minimum point of the ATC curve. The cost of producing a firms output depends on how muchlabor and capital the firm uses. A FLOC evaluation of 25 Mexican family units reveals a mean to be$30,000 with a sample standard deviation of $10,000. . c. The probability that X is 15 or less. The average variable cost (AVC) is the total variable cost per unit of output. Average variable cost: total variable cost divided by the number of units of output. 100% (13 ratings) Ans) the correct option is a) . Marginal cost is the difference between the total cost of making N units and making N + 1 units. What is the difference between voluntary administration and liquidation? Short Run and Long Run Average Cost Curve - Economics Discussion Question 17 of 20 10.0/ 10.0 Points (Exhibit: Short-Run Costs) Curve A crosses the average variable cost curve at:Correct A.approximately 2.8 units of output. Average Total Cost. what is an example of an intangible property quizlet What are the main differences between internal auditing and external auditing within an MNC? D. reserve requirement. Given the total cost curves in Figure 13, short-run average cost will be equal to long-run average cost only at an output of Q 0. Average total costs are represented by curve A) 1 B) 2. Is mortgage insurance premium and PMI the same thing? Why is Average Cost Curve U shaped? - Byju's B.approximately 5.3 units of output. Short Run Average Costs: Marginal Cost, AFC, AVC, Formulas, etc. Average cost curves are typically U-shaped, as Figure 1 shows. E. monetary base. The firms average variable cost is: because of diminishing marginal utility, the benefit of consuming more of a good: Mr. O. Carr has the cost function () = 2 + 64 if his output, y, is positive and c(0) = 0. Average Total Cost Average Total Cost (dollars) 400 600 800 1,000 1,200 Quantity According to the average total cost curves, the firm has: economies of scale. The first five columns of Table 1 should look familiarthey come from the Clip Joint example we saw earlierbut there are alsothree new columns showing average total costs, average variable costs, and marginal costs. In the long run, the total variable cost equals the total fixed cost. The long-run average cost curve is at a minimum at a level of output where : a. the firm is experiencing constant returns to scale. The average fixed cost (AFC) is the fixed cost that does not change with the change in the number of goods and services produced by a company. greater specialization of both labor and capital. The Relationship Between Average and Marginal Costs - ThoughtCo Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees. Solved When the average total cost curve is rising, the - Chegg Typically the total cost curve is not very interesting, but the average total cost (ATC) curve is. That is, ATC = AFC + AVC. Why is the average total cost curve u shaped? explicit costs. At any other level of output, short-run average cost is higher than long-run average cost, because SRTC is greater than LRTC. If the marginal cost curve is above the average total cost c | Quizlet Why are total cost and average cost not on the same graph? How do you calculate average fixed cost quizlet? If the marginal cost of pro. Average variable cost is determined by dividing the total variable cost by the output. These costs are measured in dollars. this curve starts at the origin and goes up with output. Rather than think about costs, think about grades on a series of exams. Note that at any level of output, the average variable cost curve will always lie below the curve for average total cost, as shown in Figure 1. Since fixed costs do not change, the total cost curve will follow the average variable cost curve. What will the multiplier be when the MPC is 1? At the right side of the average cost curve, total costs begin rising more rapidly as diminishing returns kick in. Average total cost (ATC) refers to total cost divided by the total quantity of output produced, . The short-run average total cost curve A) is U-shaped. The graph shows the average total cost (ATC) curve, the marginal cost (MC) curve, the average variable cost (AVC) curve, and the marginal revenue (MR) curve (which is also the market price) for a perfectly competitive firm that produces inorganic coffee beans. In contrast, marginal cost, average cost, and average variable cost are costs per unit. This marginal-average relationship is a matter of mathematical truism and can be easily understood by a simple example. A Moving to another question will save Question 2 The marginal cost curve intersects the minimum of which of the following cost curves? Economics questions and answers. Which of the following statements is true? Total Variable Cost (TVC) = AVC X Output. Long Run Costs Flashcards | Quizlet shifting cost curves: what if fixed costs increases to $200? divided by the quantity (Q) of output produced. Solved 47) Refer to the above figure. Average total costs - Chegg Watch this video to learn how to draw the various cost curves, including total, fixed and variable costs, marginal cost, average total, average variable, and average fixed costs. Marginal cost can be calculated by taking the change in total cost and dividing it by the change in quantity. Above the average total cost curve. b. it is equal to long-run marginal cost. Wed love your input. If the price of output is 12, Mr. Carr's profit maximizing output is zero. Quizlet has a free option with limited features and a paid option called Quizlet Plus for about $48 per year. C. In the long run, the average cost curve is always downward sloping. AVC tells the firm whether the output level is potentially profitable. The breakdown of total costs into fixed and variable costs can provide a basis for other insights as well. The other two are average total cost curve and average variable cost curve. The combination of two or more firms involved in different stages of producing the same good or service _____, Which of the following is not an example of a natural resource? shows the lowest average cost facing a firm as it increases output changing both its plant and labor force. Marginal cost (MC) is calculated by taking the change in total cost between two levels of output and dividing by the change in output. d. The probability that X is between 15 and 25, inclusive. In the long run, larger output can be produced from large sized plants. View the full answer. c. the sum of implicit and explicit costs. Average Total Cost Curve - proper-cooking.info This idea of the marginal cost pulling down the average cost or pulling up the average cost may sound abstract, but think about it in terms of your own grades. Now, in either of these situations, let's say that we have the more pessimistic scenario actually happens, that there's only demand for 100 tacos per day. D. In the long run, all costs are variable costs. This simply reflects the fact that it costs more in total to produce more output. If you were to get a score of 80 on your next exam, this score would pull your average down, and your new average . B) Marginal Cost. It gets U - shape due to the following reasons (i) On the Basis of AFC and AVC In the short run, since AC = AFC + AVC. Label t Choose the statement that is incorrect O A. ATC AFC+AVC Cost (dollars per jar) AVC s of output AFC. Figure 1. It is feasible to operate only when the marginal revenue is higher than average variable cost. The reason why the intersection occurs at this point is built into the economic meaning of marginal and average costs. Average Total Cost Curve: study guides and answers on Quizlet b. The paid version removes ads, lets you study offline, and includes the best features, including Quizlet Learn. Average variable cost (AVC) refers to variable costs divided by the total quantity of output produced, . The other two are average variable cost curve and average fixed cost curve. Our ebooks online or by storing it on your computer, you have convenient answers with consumer education economics workbook an Two goods are complements if a decrease in the price of one causes an increase in the demand for the other good. Average Total Cost Formula | Calculator (Excel template) - EDUCBA Solved The graph shows a firm's average fixed cost curve and | Chegg.com The average variable cost curve and the average total cost get - eNotes Recall that marginal cost, which we introduced on the previous page,is the additional cost of producing one more unit of output. What is allocation apportionment and absorption? d. explicit costs. increasing in quantity). c)Trademark Which of the following represents a federally granted right? This curve is constructed to capture the relation between average fixed cost and the level of output, holding other variables, like technology and resource prices, constant. A United Nations report shows the mean family income for Mexican migrants to the United States is $27,000 per year. Marginal costs are represented by curve B) 2. (AVC=TVC/q). Coral Corporation began operating as a business in 2017. Using the figures from the previous example, the total cost of producing 40 haircuts is $320. Overview of Cost Curves in Economics. When marginal cost is less than average cost, average cost falls and when marginal cost is greater than average cost, average cost rises. However, the cost structure of all firms can be broken down into some common underlying patterns. Falling with greater output. Answer: Economic Profit = Total Revenue - (Explicit Cost + Implicit Cost) Total Revenue in the above case is $20 Explicit costs are the cost that requires an outlay of money. -total variable cost -total cost total fixed cost -a cost that does not change, no matter how much is produced (overhead costs) -fixed cost curve is horizontal line -just draw a line from point on graph where quantity is to the price and that's the total fixed cost average fixed costs = fixed costs/quantity total variable cost B. required reserve ratio. What is the difference between average variable cost and average total cost? Further, we see that the bottom of the U-shaped average total cost curve is also the point where the marginal cost curve intersects the average total cost curve. Does this information disagree with the United Nations report? Marginal Cost Curve (MC) This term refers to the quotient of the difference between each product's total price and production. When the average total cost curve is rising, the marginal cost curve will be Below the average total cost curve. To calculate AVC, divide variable cost at a given total product level by that total product. Alexander Holmes, Barbara Illowsky, Susan Dean, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal. Average total cost (ATC) is calculated by dividing total cost by the total quantity produced. Why Long-Run Average Cost Curve is of U-Shape? | Economics Apply the 0.01 significance level, Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond. But the average cost is $320/40, or $8. Saucer-Shaped Long-run Average Cost Curve: However, many empirical studies have shown that U-shape of the long-run average cost curve is not smooth and regular as it is shown in Fig. However, the general patterns of these curves, and the relationships and economic intuition behind them, will not change. What is the difference between fixed cost variable cost total cost and marginal cost? Solved Question 2 : A) The long-run average total cost - Chegg C.the minimum value of curve B. D.the level of output where diminishing marginal returns begin. Three Properties of Cost Curves - Quickonomics. To put it in a nutshell, the average fixed cost (AFC) is the fixed cost per unit and is calculated by dividing the total fixed cost by the output level. Watch this clip as a continuation from the video on the previous page to see how average variable cost, average fixed costs, and average total costs are calculated. In the above question it would be the $5 spend for purchasing the material. Average Cost - Definition, Formula, Calculation, Examples - WallStreetMojo the average fixed costs are constant as output rises. Analyze the relationship between marginal and average costs, curve intersects the average total cost curve exactly at the bottom of the average cost curvewhich occurs at a quantity of 72 and cost of $6.60 in Figure 1. The fraction of bank deposits actually held as reserves is the A. reserve ratio. Jodi Beggs. Thus, the marginal cost for each of those marginal 20 units will be 80/20, or $4 per haircut. You just studied 18 terms! The sum of the fixed cost and the variable cost of producing a quantity of output. The same relationship is true for marginal cost and average variable cost. the difference between them (average fixed cost) declines. Once the cost curve's overall average is below MC, it is said to be dropping. Average Total Cost = Total Cost of Production / Number of Units Produced. average cost is defined as cost incurred by the business in the current period divided by output or simply cost per unit of output. In other words, it measures the amount of money that the business has to spend to produce each unit of output. it decreases, bottoms out and then rises. Thus, for Q = 80 haircuts, the average total cost is $8 per haircut, while the average variable cost is $5 per haircut. In economics, average total cost (ATC) equals total fixed and variable costs divided by total units produced. 19.7, but a wavy and irregular one. Average total cost starts off relatively high, because at low levels of output total costs are dominated by the fixed cost; mathematically, the denominator is so small that average total cost is large. In the long run, the quantities of all inputs are fixed. Average fixed costs are calculated as AFC = TFC , output or AFC = ATC AVC. Firms' sale of commodities of certain kind is strictly related to the size of the certain market and how the rivals would choose to act. The average total cost curve is constructed to capture the relation between average total cost and the level of output, holding other variables, like technology and resource prices, constant. But in the long run, none of the factors are fixed . Average total cost is total cost divided by the quantity of output. Quantity of workers times cost of each worker plus Quantity of product produced times cost per unit produced. The Relation between the Average and Marginal Cost Curve B. How do you become a commissioned security officer? The marginal cost curve may fall for the first few units of output but after that aregenerally upward-sloping, because diminishing marginal returns implies that additional units are more costly to produce. cost curves Flashcards | Quizlet Suppose that a cricket player's batting average is 50. 5) Long period average cost curve is flatter than the short period cost curve. The long-run average cost curve is at a minimum at a level of output Conversely, if the marginal cost of production for producing an additional unit is above the average total cost for producing the earlier units, as it is for points to the right of where MC crosses ATC, then producing a marginal unit will increase average costs overalland the ATC curve must be upward-sloping in this zone. Cost Curve Quiz Flashcards | Quizlet The average total cost curve is typically U-shaped. The long-run average total cost curve shows: Select one: a. the plant size or scale that the firm should build. Falling with greater output. Average cost per unit of production is equal to total cost of production divided by the number of units produced. an example of an intangible resource is quizlet AmosWEB is Economics: Encyclonomic WEB*pedia Why do economists make a distinction between M1 and M2? You'll get a detailed solution from a subject matter expert that helps you learn core concepts. It looks like it would be about, let's just call that 80 cents, 80 cents per taco as our short-run average total cost. The marginal cost curve intersects the average total cost curve exactly at the bottom of the average cost curvewhich occurs at a quantity of 72 and cost of $6.60 in Figure 1. Cost Curves: With Diagram | Production | Microeconomics The numerical calculations behind average cost, average variable cost, and marginal cost will change from firm to firm. The difference between average total cost (ATC) and average variable cost (AVC) is average fixed cost (AFC) and average fixed cost can never be constant. The average total cost is the sum of the average variable cost and the average fixed costs. , UOg, WBcWk, ruxg, YNWwO, roHch, KnmR, QJElW, nIRTk, HveCwv, QHDJ, WQX, lAFYF, NdZmNC, PMgtV, tJit, JXoewJ, EixTs, Xame, UnO, gagOcE, AnwE, xXa, mdZZ, XXY, gTH . We review their content and use your feedback to keep the quality high. Transcribed image text: The figure below shows three short-run average total cost curves for a firm. Average variable cost (AVC) is calculated by dividing variable cost by the quantity produced. The average total cost curve is typically U-shaped. -if productivity growth is positive then affects labor which is a variable resources, -the amount a firm receives for the sale of its ouput, -the value of the inputs a firm uses in production, -the firm's total revenue minus its total cost, -examine both EXPLICIT COSTS and IMPLICIT COSTS. If you ask three strangers about their birthdays, what is the probability: (a) All were born on Wednesday? Are variable cost and average variable cost the same? Total variable cost (TVC) is all the costs that vary with output, such as materials and labor. When a firm looks at its total costs of production in the short run, a useful starting point is to divide total costs into two categories: fixed costs that cannot be changed in the short run and variable costs that can be changed. E. In the long run, the firms' fixed costs are greater than its variable costs. There are various types of cost curves, all related to each other. How do you find the average variable cost? In addition, as a practical matter, if they were on the same graph, the lines for marginal cost, average cost, and average variable cost would appear almost flat against the horizontal axis, compared to the values for total cost, fixed cost, and variable cost. Average total and variable costs measure the average costs of producing some quantity of output. -fixed costs changes, so total cost must change. In the short run, some factors are fixed and others can be varied to increase the level of output. change in total cost divided by change in output 24. Solution In short run, Average Cost Curves are of U - shape. C) increases eventually because of diminishing returns D) All of the above answers are correct 25. Average Cost Curves. d. all of the above occur. Therefore, at the point where marginal cost equals average total cost, the average total cost curve stops sloping downward but hasn't begun sloping upwardthat is, the average total cost curve is at its lowest point when the marginal cost curve equals (or intersects) it FROM THE STUDY SET Econ Test 2 View this set Other answers from study sets The total cost curve is generally bowed upwards. In economics, average cost or unit cost is equal to total cost (TC) divided by the number of units of a good produced (the output Q): =. AmosWEB is Economics: Encyclonomic WEB*pedia If the score on the most recent quiz you take is lower than your average score on previous quizzes, then the marginal quiz pulls down your average. Economists assume that the only reason people take the actions they do is in response to economic incentives. Average cost has strong implication to how firms will choose to price their commodities. Why is the long run average cost curve "U" shaped? - Quora Solved 24. The short-run average total cost curve A) is - Chegg 7) Long period average cost shows how production in the long -period can be produced with . What is the meaning of average total cost? The average total cost curve intersects a average - Course Hero The addition of fixed and Variable Cost gives us total costs, which when divided by the output give us Average Costs in the short period. Why is Average Cost Curve U-shaped? Average Cost: Definition, Formula & Examples | StudySmarter The figure above shows a firm's total product curve. What is the meaning of average variable cost? Average cost per unit equals the total cost of all inventory amounts divided by the number of inventory units. This is evidence of. How do you calculate variable cost quizlet? The marginal cost curve for Stuffed Amigos production is the only one of these three curves that is DIRECTLY affected by the law of diminishing marginal returns. Average variable cost (AVC) is calculated by dividing variable cost by the quantity produced. Compute the following: a. C. excess reserve ratio. In the average cost calculation, the rise in the numerator of total costs is relatively small compared to the rise in the denominator of quantity produced. e. marginal costs. output is rising more rapidly than inputs are being increased. If the marginal cost of production is below the average total cost for producing previous units, as it is for the points to the left of where MC crosses ATC, then producing one more additional unit will reduce average costs overalland the ATC curve will be downward-sloping in this zone. In the long run, all costs are variable costs. If your score on the most recent quiz is higher than the average on previous quizzes, the marginal quiz pulls up your average. Total cost, fixed cost, and variable cost each reflect different aspects of the cost of production over the entire quantity of output being produced. Since AFC tends to decline with increase in output, the difference between ATC and AVC must reduce as output increases. Implicit cost are the costs that does not require an outlay of money. B) diminishes initially because average fixed costs diminish. In the long run, firms will exit a perfectly competitive market if the price falls below their. Did you have an idea for improving this content? This isn't necessarily always the case- the total cost curve could be linear in . This is an example of a graphic rating scale. On the other hand, if the marginal cost curve is above the average variable cost curve, the average variable cost increases. Average fixed costs falls as output rises because the same total is being spread over, or divided by, a larger number of units. Average total cost then declines, as the fixed costs are spread over an increasing quantity of output. What is variable overhead and fixed overhead? D) 4. Above the average total cost curve. \text{1} & \text{\$450} & \text{\$700}\\ On December 31, 2017, the expected future cash flows from the patent are $518,000 Average variable cost obtained when variable cost is divided by quantity of output. It is below the average total cost curve if the marginal cost curve is u shaped there are productivity gains from specialization before diminishing marginal product sets in. Accounting Profit Is Equal ToAverage Total CostsTotal Revenue Minus Total CostAverage Total Cost CurveGrade Point Average TERMS IN THIS SET (40) Accounting profit is equal to total revenue minus b. variable costs. When the average variable cost curve is upward sloping what must be true about the marginal cost curve It is above the average variable cost curve when productivity growth is positive, what happens to AFC, AVC, ATC, and MC? Answer Key: A. There are a few features to note about the total cost curve: The total cost curve is upward sloping (i.e. It simply measures the total cost at some output level divided by the number of units of output. Spreading Overhead. How do you calculate average variable cost quizlet? Average total cost curve is typically U-shaped i.e. So if you see here, as we increase the number of cars, the average total cost per car dropped. Average Total Cost | Definition | Curve | Example - XPLAIND.com Average variable cost is important because it helps a firm in deciding whether it should continue operating in the short-run. C)3. Economics questions and answers. When average variable cost is at its minimum? The reason is that average total cost includes average variable cost and average fixed cost. What are the advantages of external sources of finance? A firm's total cost is the sum of its variable costs and fixed costs. Average Costs and Curves | Microeconomics - Lumen Learning Exhibit Short Run Costs Curve B is the cost curve Correct Aaverage The average variable cost curve lies below the average total cost curve and is typically U-shaped or upward-sloping. Average total cost is total cost divided by the quantity of output. The average total cost curve reaches its minimum at 6.5 Stuffed Amigos. 49) Refer to the above figure. The reason why the intersection occurs at this point is built into the economic meaning of marginal and average costs. It would be as if the vertical axis measured two different things. The mean and standard deviation of the random variable. Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, David R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams. ATC AFC. which of the following is an intangible asset quizlet What does the long-run average total cost curve show quizlet? (b) All were born on different days of the week? If a company triples its output and its average cost decreases, then the firm is definitely experiencing. This calculation yields the cost per unit of output. Variable costs are sometimes called unit-level costs as they vary with the number of units produced. For example, the variable cost of producing 80 haircuts is $400, so the average variable cost is $400/80, or $5 per haircut. Transcribed Image Text: The average variable cost curve and average total cost curve tend to converge as output rises because * the marginal cost curve intersects the average total cost curve at its minimum. For example, as quantity produced increases from 40 to 60 haircuts, total costs rise by 400 320, or 80. But as output expands still further, the average cost begins to rise. Hawthorne, origin of human relations theory. Furthermore, the total cost curve will also increase according to the total variable cost curve. In some accounting statements, the Variable costs of production are called the Cost of Goods Sold.. What is a financially distressed company? How is the average cost per unit calculated? The long-run average cost curve is U-shaped because of which of the following? However, as output grows, fixed costs become relatively less important (since they do not rise with output), so average variable cost sneaks closer to average cost. Overview of Cost Curves in Economics - ThoughtCo Who does the existence of financial intermediaries benefit? AmosWEB is Economics: Encyclonomic WEB*pedia Assume a binomial probability distribution with n = 40 and =.55. The marginal cost curve is upward-sloping. The probability that X is 25 or greater. Experts are tested by Chegg as specialists in their subject area. Average cost refers to the per-unit cost of production, which is calculated by dividing the total cost of production by the total number of units produced. 6) Long period average cast curve is equal to one, of the short period average cost curves at a lowest point where long period Marginal cost curve intersects at the point. Average total costs | Chegg.com Business Economics Economics questions and answers 47) Refer to the above figure. Average Variable Cost (AVC) = Total Variable Cost / Q. It is important to note that the total. b. the average total cost of producing where diminishing returns are not present. The firms use the average variable cost to determine when to stop their production in the short term. Expert Answer. Solved The figure below shows three short-run average total - Chegg How do you find average fixed cost and average variable cost? Average inventory = [(5,000 $8) + (15,000 $10) + (20,000 $12)] (5,000 + 15,000 + 20,000) = $430,000 40,000 units = $10.75 per unit. -a cost that does not change, no matter how much is produced (overhead costs), -costs that change depending on how much is produced, ATC = total costs/total quantity produced, MP and MC are mirror images of each other, -MC is the cost of producing the next unit, at minimum average total cost, ATC= MC b/c if MC is lower than ATC and pulls down and MC is above and pulls ATC up, then the minimum ATC is when they intersect the lowest your ATC will get, -ATC and AVC have the same slope, which means that MC curve intersects AVC at minimum AVC, explain why the vertical distance between ATC and AVC decreases as output increases, -average fixed cost decreases due to spreading effect, at output Q, what area represents TC, VC, and FC, -marginal cost is the change in total cost generated by one additional unit of output. 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