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Top 10 facts about the world. Marginal cost and total cost are related in terms of the cost of production for manufacturing companies or service providers. Fixed costs and marginal variation in cost are both considered when determining the total cost, so total costs encompass marginal costs. The average total cost will generally decrease to a minimum before increasing, forming a U-shape.
Take a look at the table below to see how marginal cost was computed. For example, the marginal cost when the quantity is 56 is $2.82. This was computed by taking TC at 55.90Q ($350) minus TC at 38.16Q ($300) divided by 55.9Q minus 38.16Q (17.74Q).Take a look at the graph.n other words, the marginal cost is factored into the average total cost at every unit. Because of fixed cost, marginal cost almost always begins below average total cost. As quantity increases, ATC will decrease and MC will increase. Eventually they intersect, then MC continues to increase and pulls ATC up after it.