Question

Microeconomics

Posted 5 months ago

```
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) $\$ 311$
(B) This cannot be determined based on the information given.
(C) $\$ 171$
```

Sign in to unlock the answer

Answer from Sia

Posted 5 months ago

Solution

a

Marginal Cost Definition: Marginal cost (MC) is the additional cost incurred by producing one more unit of a good or service. It is calculated as the change in total cost (TC) divided by the change in quantity (Q)

b

Calculation of Marginal Cost for the Fifth Unit: To find the marginal cost of producing the fifth unit, we need to determine the change in total cost when the quantity increases from 4 to 5 units. The total cost for 4 units is not directly given, but we can infer it from the variable costs and fixed costs. The total cost for 5 units is $855

c

Total Cost for 4 Units: The total cost for 4 units can be calculated using the given variable cost for 4 units ($584) and the fixed cost (which is the total cost at 0 units,$100). Therefore, the total cost for 4 units is $584 +$100 = $684

d

Marginal Cost Calculation: The marginal cost of producing the fifth unit is the difference in total cost between producing 5 units and 4 units. Thus, $MC = \frac{\Delta TC}{\Delta Q} = \frac{TC_5 - TC_4}{5 - 4} = \frac{855 - 684}{1} = 171$

Answer

$171

Key Concept

Marginal Cost Calculation

Explanation

The marginal cost of producing the fifth unit is calculated by finding the difference in total cost between producing 5 units and 4 units. The total cost for 4 units is inferred from the variable cost and fixed cost, and the marginal cost is the change in total cost divided by the change in quantity.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Upgrade to Asksia Pro

Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.

Unlimited chat query usages

Strong algorithms that better know you

Early access to new release features

Study Other Question