Question

The total cost of producing 1,000 units of output is equal to $55,000 per week. The total cost of producing 1,010 units is equal to $55,500 per week. The marginal cost of increasing output from 1,000 units per week to 1,010 units per week is:

Answer 1

The marginal cost of increasing output from 1,000 units to 1,010 units per week is $50 per unit. This is calculated by dividing the increase in total cost ($500) by the increase in quantity (10 units). Marginal cost is crucial for understanding how costs change with the production of additional units.

Step-by-step explanation:

The marginal cost of increasing output from 1,000 units per week to 1,010 units per week is calculated by taking the change in total cost divided by the change in quantity. The total cost for producing 1,000 units is $55,000, and for producing 1,010 units, it is $55,500. The change in total cost is $55,500 - $55,000, which equals $500. The change in quantity is 1,010 units - 1,000 units, which equals 10 units.

Therefore, the marginal cost is $500 / 10, which is $50 per unit.

Marginal cost is an important concept in economics and business, representing the cost of producing one additional unit of output. It is generally upward-sloping due to diminishing marginal returns, meaning that each additional unit becomes more costly to produce after a certain point.