If the average variable cost for ten pens with the company logo on them is $0.40 and the average variable cost for eleven pens is $0.42, the marginal cost for the eleventh pen is $0.02.

Question

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The marginal cost for the eleventh pen is calculated by the increase in total variable cost divided by the increase in quantity. If the average variable cost for ten pens is $0.40, the total variable cost for ten pens is $4.00 (10 pens * $0.40). For eleven pens, at an average variable cost of $0.42, the total variable cost is $4.62 (11 pens * $0.42). The increase in total variable cost for the eleventh pen is $0.62 ($4.62 - $4.00), not $0.02.

If the Average Variable Cost for Ten Pens with the Company