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Business Economics
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Excerpt from Term Paper:
Business Economics
...... Taking into consideration the fact that the marginal cost is determined by the cost increase of variable factors, it means that when the marginal production increases, the marginal cost is reduced. When marginal production is reduced, the marginal cost increases. At a maximum marginal production level the marginal cost is at its lowest. At this minimum level of the marginal cost, marginal income is at its highest
However, the situation slightly changes on long term. All production factors are variable. In these circumstances, the company has the opportunity to increase production by modifying the volume of all production factors, which will lead to a reduction of the total average cost......
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