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- Choice 1 (5gun +8butter) choice 2 (7gun + 5butter)
If choice 1 is the base (what you are currently producing) then for choice 2 -
The opportunity cost of producing extra 2 gun is 3 butter ( which you would stop producing)
Why the cost of producing 2 guns is marginal cost? isn't this the opportunity cost for 3 butter?
- why interest paid to bank is marginal cost? isn't the interest rate is fixed?
Let's consider the example mentioned in module - Why do airlines sell the last tickets at below avg cost ?
It's because the fixed cost of Air bus, fuel, employee salary etc. are not going to change, but carrying an extra passenger at low fare will be an additional contribution to the profits. isn't this the Marginal cost?
This is my point of view.
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