Figure 7-2
-In Figure 7-2, at an output of 500, marginal cost equals
A)10.
B)20.
C)30.
D)40.

Question

Figure 7-2 
-In Figure 7-2, at an output of 500, marginal cost equals
A)10. 
B)20. 
C)30. 
D)40.

Quizplus · Accepted Answer

At an output of 500, the marginal cost curve intersects with the average variable cost curve at a point where AVC is at its minimum. This minimum point is at a cost of $20, which is the marginal cost at an output of 500. This means that producing one extra unit beyond 500 units will cost $20. Therefore, the best choice is to produce 500 units, as any extra production beyond that point will result in higher costs than revenue.

Figure 7-2 -In Figure 7-2, at an Output of 500, Marginal Cost