The firm increased production from 200,000 to 400,000 units and the total costs increased from $5,000,000 to $7,000,000. What is the marginal cost associated with this increase in production?
A) $1
B) $10
C) $10,000
D) $100,000

Question

Quizplus · Accepted Answer

The marginal cost is calculated by dividing the change in total cost by the change in quantity. Here, the total cost increased by $2,000,000 ($7,000,000 - $5,000,000) when production increased by 200,000 units (400,000 - 200,000). Thus, the marginal cost is $2,000,000 / 200,000 = $10 per unit.

The Firm Increased Production from 200,000 to 400,000 Units and the Total