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5.4: Variable Cost

  • Page ID
    210842
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    Marginal costs show how each additional unit of production affects total output. Variable costs are simply the summation of all the marginal costs.

    Table 1 shows output (col. A) and the total cost (col. B). Every time output increases, the total cost increases. Marginal cost measures the contribution each additional unit makes to the increase in total cost (col. C). If you were to add the marginal cost for each unit, you would have variable cost.

    Look at an output rate of two. The first unit caused total cost to increase by $2 (MC for the first unit). The second unit causes total cost to increase by $9 (MC for the second unit). So, variable cost at an output rate of two units is $11 ($2 + $9).

    A table with numbers and textDescription automatically generated

    Table 1

    The variable cost is simply the running total of all marginal costs for any given rate of output.

    Variable costs will show how much and how fast the total cost will rise with more output.


    This page titled 5.4: Variable Cost is shared under a not declared license and was authored, remixed, and/or curated by Martin Medeiros.

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