If C(X)represents the total cost of activity X,then which of the following expressions best represents the marginal cost of activity X?
A) C(X) - C(X - ∆X)
B) (C(X) - C(X - ∆X))/∆X
C) (C(X) - C(X - ∆X))/X
D) C(X - ∆X))/∆X

Question

Quizplus · Accepted Answer

The marginal cost of activity X is the change in the total cost with respect to a change in the level of activity, which is represented by the expression (C(X) - C(X - ∆X))/∆X. This expression measures the increase in cost for a small increase in X, and is therefore the best choice for representing marginal cost. Option A measures the total change in cost, rather than just the marginal change, so it is not an appropriate expression for marginal cost. Option C divides the change in cost by the initial level of activity, which does not give an accurate measure of marginal cost. Option D does not consider the change in cost, but only the cost at the new level of activity, and is therefore not an appropriate expression for marginal cost.

If C(X)represents the Total Cost of Activity X,then Which of the Following