It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Question

Quizplus · Accepted Answer

Average cost is the total cost divided by the quantity produced, while marginal cost is the additional cost of producing one more unit.

To find the average cost of producing 25 tables, we divide the total cost of $8,750 by 25, which gives us an average cost of $350 per table.

If the company produces one more table, its total cost increases by $375 ($9,125 - $8,750). Therefore, the marginal cost of producing the 26th table is $375.

Since the marginal cost of producing the 26th table is higher than the average cost of producing the first 25 tables ($375 > $350), it means that the average cost of producing the 26th table will be higher than the average cost of producing the first 25 tables. Therefore, the average cost is less than the marginal cost, and the answer is C.

It Costs a Furniture Company $8,750 to Produce 25 Tables