Question

Let the cost function for a manufacturer is given by \(C(x) = \frac {x^3}3 - x^2 + 2x\) (In rupees)

Which of the following statement is correct based on the above information?

(A) The marginal cost decreases from 0 to 1 and then increases onwards.

(B) The marginal cost increases from 0 to 1 and then decreases onwards.

(C) Marginal cost decreases as production level increases from zero.

(D) Marginal cost increases as production level increases from zero.

Answer 1

(A) The marginal cost decreases from 0 to 1 and then increases onwards.

The cost function for a manufacturer is given by \(C(x) = \frac {x^3}3 - x^2 + 2x\) (In rupees).

The marginal cost function is given by \(MC(x) = \frac{dC}{dx} = x^3 - 2x + 2\)

\(MC'(x) = 2x - 2\)

So, the marginal cost decreases from 0 to 1 and then increases onwards.