Question

A water company has the monopoly in the water market and sells 7 units of output at $5.00 per unit and 8 units of output at $4.90 per unit. If the water company produces and sells the eighth unit, what must its marginal cost be

Answer 1

$4.20

Step-by-step explanation:

First and foremost, the marginal cost is the cost incurred in producing an extra unit of output, in this case, the marginal cost of eight-unit is the extra cost of producing one more after 7 units have been produced

Total Cost of producing 7 units=$5.00*7=$35.00

Total Cost of producing 8 units=$4.90*8=$39.20

Marginal cost of eight unit=Total Cost of producing 8 units-Total Cost of producing 7 units

Marginal cost of eight unit=$39.20-$35.00

Marginal cost of eight unit=$4.20