Question

When output is 20, fixed costs are $100 and variable costs are $400. When output rises to 21, fixed costs are $100 and variable costs are $450. This implies that the marginal cost of the last unit of output equals:

Answer 1

The marginal cost of last unit is 50 dollars

Step-by-step explanation:

Given output = 20

Fixed cost = $100

Variable costs = $400

Now find the total cost (TC) of production when the output is 20. So TC = fixed costs + variable costs.

Total cost at 20 units = 100 + 400 = 500

Now output rises to 21 units with fixed cost $100 and variable cost $450.

Now total cost at 21 units = fixed costs + variable costs.

= 100 + 450 = 550.

Now find the marginal cost of last units.

The marginal cost of lat unit = total cost of 21 units – the total cost of 20 units.

= 550-500

= $50