The average total cost when four units of output are produced is $12, and the average total cost when five units of output are produced is $11. The marginal cost of the fifth unit of output is:

Question

Quizplus · Accepted Answer

The marginal cost (MC) of producing the fifth unit can be calculated using the formula MC = (Total Cost at 5 units - Total Cost at 4 units). Given that the average total cost (ATC) for 4 units is $12, the total cost for 4 units is 4 * $12 = $48. For 5 units, the ATC is $11, so the total cost for 5 units is 5 * $11 = $55. Therefore, the MC of the fifth unit is $55 - $48 = $7.

The Average Total Cost When Four Units of Output Are