What is the importance of marginal costs?
Limit cost (MC) is the cost of the last unit produced in the production process, the last service or the last units consumed. It is an economic term that takes into account the reduction or increase in the cost of the production or consumption of special goods and services. Limit costs are often associated with marginal income, marginal benefits and average and total costs. Savings from the range generally prefer reduced marginal and average costs for additional inputs, although MC may increase after maximum production capacity. The marginal costs often monitor the curved line on the graph, first decrease, as the process becomes more efficient, and later increases because other production requirements cause the process to be less efficient.
For example, a factory that is created for the production of the product once, as soon as the cost of the production of each PR production will be reduced, as it will take very little energy to increase production to increase the existing machines. However, the factory eventually dIt will take up its maximum capacity, and if additional products are required, a new factory will have to be built, the old will have to compensate for overtime workers, or various expenses will be required to run. In this case, the limit costs will increase because the company will have to spend more energy, time and money to continue the production of additional goods.
Labor division and specialization can also reduce production costs for other units. Many companies take advantage of specializing in reducing their production or service costs. Allowing workers can specialize in certain tasks can streamline production processes. The assembly line is a popular example of this confescence because it allows workers or machines to improve and optimize less responsibility.
limit costs are also important for consumers who want to buy additional units of good or servicey. Shops often use this when offering shops and sales such as buying one, get one half of the price or buy one, get one free (bogo). Not only does it encourage shoppers to buy more units, but it probably generates income for society. Consumers are more likely to buy a second item for half the price, because the marginal costs are half of the original cost. In the case of BOGO stores that offer free item, MC is zero effectively.