When a firm produces 50 000 units of output, its total cost equals $6.5 million. When it increases its production to 70 000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is ________.
Question
When a firm produces 50 000 units of output, its total cost equals 9.4 million. Within this range, the marginal cost of an additional unit of output is ________.
Solution
To calculate the marginal cost, we need to find the change in total cost divided by the change in quantity.
Step 1: Identify the change in total cost. The total cost increases from 9.4 million. So, the change in total cost is 6.5 million = $2.9 million.
Step 2: Identify the change in quantity. The quantity of output increases from 50,000 units to 70,000 units. So, the change in quantity is 70,000 units - 50,000 units = 20,000 units.
Step 3: Calculate the marginal cost. The marginal cost is the change in total cost divided by the change in quantity. So, the marginal cost is 145 per unit.
So, within this range, the marginal cost of an additional unit of output is $145.
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