In particular, we are often interested in the total costs, average costs, and marginal costs incurred by producing a certain quantity of goods. We are similarly interested in total revenue, average revenue and marginal revenue gained by producing the same amount of goods. Marginal cost is the change in the total cost for producing one more unit. Marginal revenue is the change in the total revenue for selling one more unit. Average cost is the total cost divided by the number of units produced.
Average revenue is the total revenue divided by the number of units sold.
The total cost incurred to produce different quantities of monitors is given in the table below. Where Quantity is the number and heart monitors produced and D means change in . We see that as we produce more monitors, our marginal cost for producing each new unit declines. This is to be expected as the XYZ company realizes economies of scale. If the cost of producing an additional unit decreases as we produce more units, it follows that the average cost of production per unit will also decrease.