A firm is producing 4 units of output at an average total cost of $40. When the firm produces 5 units of output, average total cost rises to $50. What is the marginal cost of the fifth unit of output?
A) $10
B) $30
C) $90
D) $120

Question

Quizplus · Accepted Answer

The marginal cost of the fifth unit is calculated by the increase in total cost divided by the increase in output. The total cost for 4 units is 4*$40 = $160. For 5 units, it's 5*$50 = $250. The increase in total cost is $250 - $160 = $90, which is the marginal cost of the fifth unit.

A Firm Is Producing 4 Units of Output at an Average