Question

Output Average Fixed Cost Average Variable Cost 1 $50.00 $100.00 2 25.00 80.00 3 16.67 66.67 4 12.50 65.00 5 10.00 68.00 6 8.37 73.33 7 7.14 80.00 8 6.25 87.50 The marginal cost of the fifth unit of output is:__________ a. $62. b. $78. c. $3. d. $80.

Answer 1

Based on the change in cost as a result of the fifth unit of output, the marginal cost is c. $3.

What is the marginal cost?

The marginal cost is cost of producing an additional unit of a good and can be found by the formula:

= Average variable cost when additional good is produced - Previous average variable cost

Solving gives:

= 68 - 65

= $3.00

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