QuestionJuly 25, 2025

A firm is producing 1,000 units at a total cost of 5,000 When it increases production to 1,001 units, its total cost rises to 5,008 For this firm, __ a. marginal cost is 8 and average variable cost is 5 b. marginal cost is 5 and average total cost is 8 c. marginal cost is 8 and average total cost is 5 d. marginal cost is 5 and average variable cost is 8

A firm is producing 1,000 units at a total cost of 5,000 When it increases production to 1,001 units, its total cost rises to 5,008 For this firm, __ a. marginal cost is 8 and average variable cost is 5 b. marginal cost is 5 and average total cost is 8 c. marginal cost is 8 and average total cost is 5 d. marginal cost is 5 and average variable cost is 8
A firm is producing 1,000 units at a total cost of 5,000 When it increases production to 1,001 units, its total cost rises to 5,008 For this firm, __ a. marginal cost is 8 and average variable cost is 5 b. marginal cost is 5 and average total cost is 8 c. marginal cost is 8 and average total cost is 5 d. marginal cost is 5 and average variable cost is 8

Solution
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Answer

c. marginal cost is \8 and average total cost is \5 Explanation 1. Calculate Marginal Cost **Marginal Cost (MC)** is calculated as the change in total cost divided by the change in quantity. Here, \Delta \text{Total Cost} = \5,008 - \5,000 = \8 and \Delta \text{Quantity} = 1,001 - 1,000 = 1. So, MC = \frac{\8}{1} = \8. 2. Calculate Average Total Cost **Average Total Cost (ATC)** is calculated as total cost divided by quantity. For 1,000 units, ATC = \frac{\5,000}{1,000} = \5.

Explanation

1. Calculate Marginal Cost<br /> **Marginal Cost (MC)** is calculated as the change in total cost divided by the change in quantity. Here, $\Delta \text{Total Cost} = \$5,008 - \$5,000 = \$8$ and $\Delta \text{Quantity} = 1,001 - 1,000 = 1$. So, $MC = \frac{\$8}{1} = \$8$.<br /><br />2. Calculate Average Total Cost<br /> **Average Total Cost (ATC)** is calculated as total cost divided by quantity. For 1,000 units, $ATC = \frac{\$5,000}{1,000} = \$5$.
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