Question

Describe the difference between Marginal Costs and EUAC

Answer 1

It can be mentioned that marginal cost is nothing but the cost of producing one extra unit and usually in a cost structure of a firm the marginal cost is an increasing curve. However equivalent uniform annual cost or EUAC is nothing but the annual cost has to be paid every year in order to equal the cash flow of a given cost structure of a firm. Where model to calculate the marginal cost you just need to know no the cost of producing (n-1) units and n units but in order to calculate EUAC, you have to know the overall cost cash flow where marginal cost usually includes only variable cost but EUAC also takes fixed cost into account