Final answer:
Marginal cost is the additional cost of producing one more unit of output, varying depending on the number of units produced. In the example, varying marginal costs for producing computers are provided, which, along with fixed costs, contribute to the total cost of production.
Step-by-step explanation:
Understanding Marginal Cost in Production
The concept described in the student's question relates to marginal cost, which is a fundamental element in the study of economics and business. Marginal cost represents the additional cost of producing one more unit of output. This is not to be confused with average cost, which is the cost per unit of all units produced. The marginal cost can vary with the quantity produced due to factors like economies of scale and the law of diminishing returns.
In the provided example, a computer company with fixed costs of $250 has varying marginal costs for producing each additional computer. These costs range from $700 for the first computer to $500 for the seventh. To calculate the total cost of production for a specific number of computers, one would sum the fixed costs and the marginal costs of each computer produced up to that quantity.
For example, if we calculate the total cost of producing three computers, we would add the fixed costs ($250) to the sum of the marginal costs for producing each of the three computers ($700 for the first, $250 for the second, and $300 for the third). This calculation demonstrates how marginal costs contribute to the overall production costs.