Hi
We are taught that under some circumstances that Marginal Cost Curve is represented by Supply Curve.Marginal cost is the cost of an additional unit but the institute notes say that this can be calculated in one of two ways.Change in total cost divided by change in quantity or change in variable cost divided by change in quantity.Clearly different results will be obtained.My question is for the the purposes of CFA level one what is the correct approach? Intuitively it should be total cost otherwise you would understate costs and arrive at a lower minimum price a supplier would accept.
Perhaps put another way,are the supply/marginal cost curves we are dealing with reflections of the total marginal cost or marginal variable cost.
Thanks