Question

If Farmer Jake plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer Jake's marginal cost of producing 9 units of output (which require 2 bags of seed) is

Answer 1

Answer: $30

Explanation: Marginal cost can be defined as the addition to the total cost when one more unit of output of service or good is produced. Marginal cost can be computed by dividing total cost with the difference of output at two levels. It can be shown as below :-

Marginal cost = change in total cost / change in output

where,

change in total cost = (120 * 2) - (120 * 1 ) = 120

change in total output = 9 - 5 = 4

therefore :-

$Marginal\:cost\:=\:\frac{120}{4}$

                                  = $30