Refer to the table below. The marginal cost of the 4^th unit of activity is: $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Units of } \ \text { Activity } \end{array} & \begin{array} { c } \text { Total } \ \text { Cost } \end{array} & \begin{array} { c } \text { Total } \ \text { Benefit } \end{array} \ \hline 0 & \$ 0 & \$ 0 \ \hline 1 & \$ 2 & \$ 12 \ \hline 2 & \$ 6 & \$ 22 \ \hline 3 & \$ 12 & \$ 30 \ \hline 4 & \$ 20 & \$ 36 \ \hline 5 & \$ 30 & \$ 40 \ \hline 6 & \$ 42 & \$ 42 \ \hline 7 & \$ 56 & \$ 43 \ \hline \end{array}$$

Question

Quizplus · Accepted Answer

To find the marginal cost for the 4th unit of activity, we need to calculate the change in total cost when we increase the activity level from 3 to 4.

Marginal Cost = Change in Total Cost / Change in Activity

Change in Total Cost = Total Cost of 4th unit - Total Cost of 3rd unit
= $20 - $12
= $8

Change in Activity = 4 - 3
= 1

Marginal Cost = $8 / 1
= $8

Therefore, the marginal cost of the 4th unit of activity is $8. Since the marginal cost is less than the marginal benefit ($10), it is still profitable to produce the 4th unit. However, the marginal cost of the 5th unit of activity is $10, which is equal to the marginal benefit. This means that producing the 5th unit would provide no additional profit, so the best choice is to produce only 4 units.

Refer to the Table Below A)$5 B)$6 C)$8 D)$10

Refer to the Table Below A)$5
B)$6
C)$8
D)$10