Question

Define the following: fixed cost, variable cost, marginal cost and marginal revenue

Answer 1

Answer
Fixed cost
The fixed cost is constant cost at all level of output in short run and there is no fixed cost in long run.
Ex. John produces wheat for which he pays rent of $1000 per year and he can hire labors at the wage of $40 per day.
The cost of rent is fixed for a year with an output level so the fixed cost is $1000
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Variable cost is the cost varies with the total output because the cost is paid to the variable factors.
In the last example, the cost of the labor wage is the variable cost.
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Marginal cost is the cost of an extra unit produced, the cost which increases because of production of an extra unit.
Ex.
Maya produces 10 unit of bread in total cost of $100 and 11 unit in $115
The MC of 11 th unit is 115-100
=$15
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Marginal revenue is the revenue from the extra unit sold or we can say the increase in revenue if we increase sell by one unit.
The MR can be negative or zero.
Ex.
Rohan sells his output of 12 unit at $100 and 13 unit at $110
then the MR=110-100=$100

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