How to Calculate Marginal Factor Cost
- 1). Calculate the change (or difference) in the total factor cost. The total factor cost is the total cost incurred by the business from the use of a given resource.
Example: Change in total factor cost = $100 - $20
Result: Change in total factor cost = $80 - 2). Calculate the change (or difference) in the factor quantity. The factor quantity is the numerical amount of resources used at a given cost.
Example: Change in factor quantity = 10 - 6
Result: Change in factor quantity =4 - 3). Divide the change in total factor cost by the change in factor quantity.
Example: $80 / 4
Result: Marginal factor cost = $20
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