A firm currently produces 3,500 units of output per week. After an additional worker is hired, output rises to 3,750 units per week. If the weekly wage paid to a worker is $500, what is the firm's short-run marginal cost?
A) $500
B) $250
C) $2
D) None of the above is correct.

Question

Quizplus · Accepted Answer

The marginal cost is the change in total cost divided by the change in output. The additional worker increases output by 250 units (3,750 - 3,500), and the cost of hiring the worker is $500. Therefore, the marginal cost is $500 / 250 = $2 per unit.

A Firm Currently Produces 3,500 Units of Output Per Week