Econ 420 -- Fall 2007

A numerical example of calculating marginal costs:

A graph of our simple example:

The general case is a U-Shaped Average Cost Curve:

Different firms might have different costs:

The marginal cost curve intersects the average cost curve at the minimum of the average cost curve. Proof:

If adding one more unit change the average cost a bit, the marginal cost can be quite different from the average cost.