Your company is planning to air a number of television commercials during the ABC television network s presentation of the Academy Awards. ABC is charging your company $795,000 per 30-second spot. Additional fixed costs (development and personnel costs)amount to $400,000, and the network has agreed to provide a discount of for x television spots. Compute marginal cost and average cost .

Question

Your company is planning to air a number of television commercials during the ABC television network s presentation of the Academy Awards. ABC is charging your company $795,000 per 30-second spot. Additional fixed costs (development and personnel costs)amount to $400,000, and the network has agreed to provide a discount of  for x television spots. Compute marginal cost  and average cost  .

Quizplus · Accepted Answer

Marginal cost is the cost of producing one additional unit. In this case, it would be the cost of airing one additional television spot during the Academy Awards. The marginal cost would be equal to the cost of one 30-second spot, which is $795,000.

Average cost is the total cost divided by the number of units produced. In this case, the total cost would be the sum of the cost of airing all the television spots and the fixed costs. The number of units produced would be the number of television spots aired. We know that the network has agreed to provide a discount of 11% for x television spots. However, we don't know what the value of x is, so we can't calculate the average cost. Therefore, the answer cannot be A or C.

D and E are also incorrect because they do not provide any explanation. B is the correct answer because it is the only choice that provides a logical explanation for the calculation of marginal cost.

Your Company Is Planning to Air a Number of Television