Question
What is the relationship between total variable cost and marginal cost? Explain.
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Answer
Marginal cost is the slope of the total variable cost curve. It's relationship is as given:
- When Marginal Cost falls, Total Variable Cost increases at a diminishing rate.
- When Marginal Cost is minimum (at point P), Total Variable Cost is at its inflexion point (at point P1).
- When Marginal Cost rises, Total Variable Cost increases at an increasing rate.
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