Question

In the short​ run, the marginal cost of the first unit of output is​ $20, the marginal cost of producing the second unit of output is​ $16, and the marginal cost of producing the third unit of output is​ $12. The​ firm's total variable cost of producing three units of output​ is:

A) $12.
B) $16.
C) $20.
D) $48.

Answer 1

Hence, the firm's total variable cost of producing three units of output​ is $48 unit.

Thus, the correct option is d. $48 unit.

Step-by-step explanation:

The computation of total variable cost is shown below:

= marginal cost of the First unit of output + marginal cost of the second unit of output + marginal cost of the third unit of output

= $20 + $16 + $12

= $48

The variable cost include all type of cost which is change when the production level changes. In the given question, the output level changes with the unit which reflects the variable cost. So, the cost would be added in the computation part.

Hence, the firm's total variable cost of producing three units of output​ is $48 unit.

Thus, the correct option is d. $48 unit.