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The relationship between average cost AC and marginal cost MC can be explained by observing mathematical relationship between them. In other words AC is calculated by dividing the total cost by the quantity of output. Gwgch7 Or TC AC Q. Tc ac mc formula . Marginal Revenue MR Change in Total Revenue Change in Q. AC refers to TC per unit of output and MC refers to addition to TC when one more unit of output is produced. The change in the production cost for each unit increase in output. What is total cost. Often we set Q 1 because marginal cost is defined as the additional cost from one more unit of output. Therefore Assuming that AC 0 and Q 0 the relationship between AC and MC can be written as. In the same way marginal cost can also be calculated from total cost. Marginal Cost MC Change in Total Costs Change in Output. AVC TVCQ 3. Using this symbol we can write the mathematical formula for marginal cost. We know that AC TCQ. Marginal Product MP Change in