Econ: Marginal Cost..I am confused

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cfa_candidate_2011

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We can calculate marginal cost from total cost which includes variable cost and fixed cost. If variable cost increases then marginal cost increase too.

My question: What is relationship with fixed cost? i. e. if fixed cost increases then does marginal cost increase too? if it is then why a $12 increase in fixed cost doesn't increase marginal cost for boby's salon(page no. 198,Second paragraph).

Please help me on this.
 
No relationship between FC and MC

MC measures the slope of the ATC and AVC curves.
 
here is my point, if it measures slope of the ATC, how could there be no relationship with FC because ATC includes(Fixed cost and variable cost). Can anybody explain ?? i couldn't able to find answers in CFAI book as it shows the examples of the contact FC only...
 
I forget most of this stuff unfortunately but think about what Marginal Cost measures: the incremental cost of each good produced. Fixed costs stay the same, you already paid those. So there is no relationship between the two.
 
Marginal cost meas that what you will cost if you want to produce one more unit of goods at the point that you have already produces some units.I am a student studying Eco, wish to help you to some degree.Eco is the sytmatic reality, a simple real world.So you shall think about it in relationship with the real life.Think more with simple example , it helps you to understand.
 
page 198 second paragraph?
Which book? official 2012?
which chapter is it?
 
Margin is referred to as the difference. If fixed cost increases the total cost of producing x units increases too. Since Margin is the difference between producing x and x+1; the difference remains the same as changes in fixed costs would result in an increase in the cost of both x and x+1.

(best to my understanding)
 
mohammad.belaal Wrote:
-------------------------------------------------------
> Margin is referred to as the difference. If fixed
> cost increases the total cost of producing x units
> increases too. Since Margin is the difference
> between producing x and x+1; the difference
> remains the same as changes in fixed costs would
> result in an increase in the cost of both x and
> x+1.
>
> (best to my understanding)

+1 for you.

I understand the concept now, Thank you all of you for your valuable input. However, i would
like to demonstrate why marginal cost will not increase when fixed cost increase because it
might help others who are also looking for the answer.


Number of units| Total Cost| Marginal Cost
1 |12
2 |16 |4
3 |18 |2
4 |21 |3

Now lets assume that fixed cost increased by $5. Now the above example would look
like


Number of units| Total Cost| Marginal Cost
1 |17(include $5 increase)
2 |21 |4
3 |23 |2
4 |26 |3


Marginal cost remains the same.


Thank you all of you one more time.
 
marginal cost is simply the cost to produce an addtional unit nothing more nothing less...................fixed cost is the capital that must be invested whether u are producing 1 or 10000
 
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