Question

Macroeconomics

Posted 3 months ago

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The table below contains costs incurred by Fantabulous Enterprises, Inc., but some values are missing. Assume that the quantity where average total cost is minimized is a whole number and included in this table.
\begin{tabular}{lllll}
Quantity & Variable costs & Total Costs & Marginal costs & Average total costs \\
\hline 0 & & $\$ 100$ & & \\
1 & & $\$ 279$ & $\$ 179$ & $\$ 279$ \\
2 & $\$ 320$ & $\$ 420$ & $\$ 141$ & $\$ 210$ \\
3 & $\$ 447$ & $\$ 547$ & $\$ 127$ & $\$ 182$ \\
4 & $\$ 584$ & & $\$ 137$ & $\$ 173$ \\
5 & $\$ 755$ & $\$ 855$ & & $\$ 171$ \\
6 & & $\$ 1084$ & $\$ 229$ & $\$ 180$ \\
7 & $\$ 1295$ & $\$ 1395$ & $\$ 311$ & $\$ 200$
\end{tabular}
What is this firm's marginal cost of producing the fifth unit of output?
Choose 1 answer:
(A) $\$ 137$
(B) This cannot be determined based on the information given.
(C) $\$ 171$
(D) $\$ 100$
() $\$ 311$
```

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Answer from Sia

Posted 3 months ago

Solution

a

Marginal Cost Calculation: Marginal cost (MC) is the increase in total cost when one additional unit is produced

b

Using the Data: To find the MC of the fifth unit, subtract the total cost of producing four units from the total cost of producing five units

c

Mathematical Expression: MC = TC_5 - TC_4, where TC_5 is the total cost of producing 5 units and TC_4 is the total cost of producing 4 units

d

Given Data: TC_5 = $855, TC_4 is not given directly but can be calculated as TC_3 + MC_4

e

Calculate TC_4: TC_3 = $547, MC_4 =$137, so TC_4 = TC_3 + MC_4 = $547 +$137 = $684

f

Calculate MC_5: MC_5 = TC_5 - TC_4 = $855 -$684 = $171

Answer

$171

Key Concept

Marginal cost is the additional cost of producing one more unit of output.

Explanation

The marginal cost of producing the fifth unit is calculated by the change in total cost when moving from four to five units of output.

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