3 ms·
Marginal versus average cost. Extremely low marginal cost (cost of the next unit to produce) but extraordinarily high average cost (includes capex). You typical
by tomrod 2y ago
Marginal versus average cost. Extremely low marginal cost (cost of the next unit to produce) but extraordinarily high average cost (includes capex). You typically make decisions for profit maximization on marginal cost.
- adrianN 2y agoYou can ignore capex if borrowed money is literally free, which historically happens very rarely.
- pyrale 2y agoYou can safely ignore capex once the plant is built, though. Because nobody is going to give you the money back. And so, after the plant is built, the only relevant optimization parameter left is marginal cost.