Q.The cost (in rupees) of producing x items in factory, each day is given by πΆ(π₯) = 0.00013π₯3 + 0.002 π₯2 + 5π₯ + 2200 Find the marginal cost when 150 items are produced.
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Marginal Cost: The Cost of One More
Imagine you run a small bakery. Every morning you bake 50 loaves; your total cost β rent, flour, yeast, electricity, your own time β comes to βΉ2,000, an average of βΉ40 per loaf.
Now a customer asks for one more loaf. What does baking that 51st loaf actually cost? Not βΉ40 β the rent doesn't change and your time is already paid; the oven is already hot. You need only a little more flour, yeast, and electricity: maybe βΉ15.
That βΉ15 is the marginal cost.
The Core Intuition
Marginal cost answers one question: "If I produce one more unit, how much does my total cost increase?"
It is not the average cost. It is not the total cost. It is the change in total cost when output changes by exactly one unit.
Think of it as the "extra cost" β the cost of the next step, not the cost of all steps so far.
The Precise Definition
Let TC(Q) be the total cost of producing Q units. The marginal cost of the Q-th unit β of increasing output from Qβ1 to Q β is:
MC(Q)=TC(Q)βTC(Qβ1)
When output can change continuously, we use the derivative:
MC(Q)=dQdTCβ
MC=ΞQΞTCβorMC=dQdTCβ
Why It Matters
Marginal cost is the decision-maker's cost. When a firm asks "Should I produce one more unit?", the answer depends on whether the marginal revenue exceeds the marginal cost. If yes, produce it; if no, stop.
This is why marginal cost typically:
- Falls initially β fixed costs are spread out and workers specialise.
- Rises eventually β because of diminishing returns (more workers in a fixed kitchen get in each other's way).
A common mistake: confusing marginal cost with average cost. If average cost is βΉ40 and marginal cost is βΉ15, producing one more lowers the average β but the decision is still based on marginal cost, not average.
A Quick Example
| Loaves | Total Cost (βΉ) | Marginal Cost (βΉ) |
|---|---|---|
| 0 | 500 | β |
| 1 | 520 | 20 |
Concept: Marginal Cost β the rate of change of total cost with respect to the number of items produced, i.e. Cβ²(x).
Step 1: Differentiate C(x) term by term.
C(x)=0.00013x3+0.002x2+5x+2200
Cβ²(x)=0.00039x2+0.004x+5
Step 2: Substitute x=150 into Cβ²(x).
Cβ²(150)=0.00039(150)2+0.004(150)+5
Step 3: Compute stepwise.
1502=22500 β¦
Marginal cost is Cβ²(x). Here Cβ²(x)=0.00039x2+0.004x+5, and at x=150 this equals βΉ14.375 per item.
Marginal cost is the derivative of the total cost function. Given
C(x)=0.00013x3+0.002x2+5x+2200,
differentiate term by term:
Cβ²(x)=3(0.00013)x2+2(0.002)x+5=0.00039x2+0.004x+5. β¦
Method: Computing a Marginal Quantity at a Given Level
Any question that asks for the "marginal cost," "marginal revenue," or similar at a specific production level x0β is asking for the derivative of the corresponding total function, evaluated at that point.
Steps
Step 1: Recognize that "marginal" means "derivative"
For a total quantity described by a function T(x) (total cost, total revenue, etc.), the marginal quantity is:
Marginal=dxdTβ=Tβ²(x)
This is the instantaneous rate of change of the total with respect to the number of units.
Step 2: Differentiate the total function term by term
Apply the power rule to each term of the given polynomial (or other) function:
dxdβ(axn)=naxnβ1
Keep every coefficient exact β do not round until the final numerical step. β¦
Common Mistakes
Mistake 1: Confusing marginal cost with average cost
Marginal cost is Cβ²(x), the instantaneous rate of change of total cost β not xC(x)β, the average cost per item. Dividing C(150) by 150 gives a completely different (and wrong) number for this question.
Mistake 2: Power-rule slip on the cubic term β¦
- GUJCET 2025Set 031 markMCQQ.The total cost C(x) in Rupees, associated with the production of x units of an item is given by C(x)=0.05x3β0.2x2+3x+500. The marginal cost, where x=3 is _____ (in Rupees) (A) 3.15 (B) 30.15 (C) 3.015 (D) 30.015
βΊReveal solutionSolution
Marginal cost =dxdCβ evaluated at the given x.
Cβ²(x)=0.15x2β0.4x+3. At x=3: β¦
- CA Foundation 2026Set may-20261 markMCQQ.Use the following information for Q 59, Q 60 and Q 61;Calculate the marginal cost of the 5th unit of production. (A) βΉ 8 (B) βΉ 23.60 (C) βΉ 43.60 (D) βΉ 118
No. of units Total Fixed Cost (βΉ) Total Variable Cost (βΉ) 0 100 0 1 100 50 2 100 80 3 100 100 4 100 110 5 100 118 βΊReveal solutionSolution
MC of the 5th unit = TVCβ β TVCβ = 118 β 110 = βΉ8.
Step 1 β Marginal cost formula
Marginal cost = change in total cost when output rises by one unit. Since fixed cost is constant, MC=ΞTVC.
Step 2 β Read the relevant figures
No. of units Total Fixed Cost (βΉ) Total Variable Cost (βΉ) 4 100 110 5 100 118 Step 3 β Compute
MC5β=TVC5ββTVC4β=118β110=βΉ8
(Equivalently, TCβ β TCβ = 218 β 210 = βΉ8.) β¦
- CA Foundation 2025Set may-20251 markMCQQ.Use the following data to answer question 33 and 34 :Between 10 and 20 units, what is the marginal cost per unit ? (A) βΉ 10 (B) βΉ 20 (C) βΉ 100 (D) βΉ 220
Quantity 0 10 20 30 40 Total Cost (in βΉ) 100 220 320 410 510 βΊReveal solutionSolution
MC per unit = ΞTC Γ· ΞQ = (320 β 220) Γ· (20 β 10) = 100/10 = βΉ10.
Step 1 β Change in total cost
Between 10 and 20 units:
ΞTC=320β220=βΉ100
Step 2 β Change in output
ΞQ=20β10=10Β units
Step 3 β Marginal cost per unit
MC=ΞQΞTCβ=10100β=βΉ10
Why the other options are wrong
- (B) βΉ20 doubles the correct figure.
- (C) βΉ100 is the TOTAL extra cost of the batch, not the PER-UNIT marginal cost.
- (D) βΉ220 is simply the total cost at 10 units β not marginal at all. β¦
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