Explain the relationship between Marginal Cost and Average Cost with the help of cost schedule.
Explain the relationship between Marginal Cost and Average Cost with the help of cost schedule.
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The relationship between AC and MC is explained with the help of the following schedule:
| Output | TC(Rs.) | AC(Rs.) | MC(Rs.) |
| 0 | 10 | ∞ | - |
| 1 | 20 | 20 | 10 |
| 2 | 28 | 14 | 8 |
| 3 | 34 | 11.3 | 6 |
| 4 | 38 | 9.5 | 4 |
| 5 | 42 | 8.4 | 4 |
| 6 | 48 | 8 | 6 |
| 7 | 56 | 8 | 8 |
| 8 | 72 | 9 | 16 |
(i) So long AC is falling, AC is greater than MC.
(ii) When AC is rising, AC < MC
(iii) When AC lowest, AC = MC.
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