What is the relationship between marginal costs and total costs?
Limit costs and total costs are related to production costs for manufacturing companies or service providers. In determining the total costs, fixed costs and marginal changes are considered, so that the total costs include marginal costs. The average total costs are generally reduced to a minimum before increasing and creating the shape of U. Limiting costs and total costs often intersect on the graph, although the curves of the marginal cost may occur on different shapes depending on the process.
In determining marginal costs and total costs, the company must first calculate initial fees and fixed costs. These costs cannot be changed and are essential for the process to occur. Examples of them would include rent, production facilities, minimum employees or other costs that will not change with output production. In the end, the costs will be high compared to the limit cost of production, but will take into account the average total cost per unit with marginal costs. Fixed costs and expensive boardsDy are incredibly high and include everything from hiring research specialists to experiments to the purchase of drug production equipment. Further fixed costs that contribute to the total costs would include clinical evaluation, marketing campaigns and regulation and certification costs. These are often necessary for this sector to create a flow of income and do not change depending on how many units of the drug are produced.
Limit costs are likely to be low in the production of other drug units. After research, the drug was developed and production equipment and factories were created, it will not cost too much to produce one pill. In this way, the company is capable of prof.Duce a large number of drugs without drastically rising costs. Companies use low marginal costs to obtain their high fixed costs through drug sales.
branch of drug development JE example of the industry produced by low -limit products, but high average total costs. Given that the costs of research and development, as well as machine costs, must be proven in determining the total costs, the average cost per pill will be relatively high. Low limit costs may compensate for some of these high fixed costs, allowing companies to justify higher total costs.