A perfectly competitive firm has a random marginal cost with a 50 percent chance of a high marginal cost of $10, a 30 percent chance of a marginal cost of $8, and a 20 percent chance of a low marginal cost of $5. What is the firm's expected marginal cost?

Question

Quizplus · Accepted Answer

The expected marginal cost is calculated as the weighted average of each possible cost with its corresponding probability. 
Expected marginal cost = (0.5 * $10) + (0.3 * $8) + (0.2 * $5) = $5 + $2.40 + $1 = $8.40. 
Therefore, the best choice is C.

A Perfectly Competitive Firm Has a Random Marginal Cost with a 50