In the short run, the marginal cost of the first unit of output is $20, the average variable cost of producing three units of output is $16, and the marginal cost of producing the second unit of output is $16. What is the marginal cost of producing the third unit of output?
A) $12
B) $16
C) $20
D) $48

Question

Quizplus · Accepted Answer

The marginal cost of the third unit can be calculated using the information about average variable cost (AVC) for three units and the marginal costs of the first two units. The total variable cost (TVC) for three units is AVC multiplied by quantity, which is $16 * 3 = $48. The TVC for the first two units is the sum of their marginal costs, $20 (first unit) + $16 (second unit) = $36. The marginal cost of the third unit is the difference between the TVC for three units and the TVC for two units, which is $48 - $36 = $12.

In the Short Run, the Marginal Cost of the First