Use the table below to answer the following question Units T

Use the table below to answer the following question. Units Total Fixed Cost (dollars) 150 150 150 150 Total Variable Cost (dollars) 25 48 70 100 of Output 2 3 4 What is the marginal cost (MC) of producing the fourth unit of output?

Solution

Marginal cost is the addition to the total cost when one more unit of variable factor is employed.

When total variable factor cost is given then marginal cost can be calculated as change in total variable cost when one more unit of variable factor is employed.

Calculating the marginal cost (MC) of producing the fourth unit of output -

MC of 4th unit = TVC of producing 4 units - TVC of producing 3 units

MC of 4th unit = 100 - 70 = 30

Thus,

The marginal cost (MC) of producing the fourth unit of output is $30.