Question

Ok, so I know how to answer the question but I also want to find the MC through the TVC alone. I multiplied the AVC of 6 and 7 but I dont get the same MC of 112.78 using TVC way, for TVC i got 120.02. Is there a reason TVC is different from TC?

Question 11: Refer to the data. If the firm decided to increase its output from 6 to 7 units, what are its marginal costs and marginal revenue? Assuming that the price of output is 115$. Output Average fixed cost $50.00 25.00 16.67 12.50 10.00 8.37 6.14 6.25 Average variable cost $100.00 80.00 66.67 65.00 68.00 73.33 80.00 86.50

Answer 1

First way: Calculating MC from TVC

Output	AFC	AVC	TVC	MC
1	50	100	100	NA
2	25	80	160	60
3	16.67	66.67	200	40
4	12.5	65	260	60
5	10	68	340	80
6	8.37	73.33	440	100
7	6.14	80	560	120
8	6.25	86.5	692	132

TVC = OUTPUT * AVC

MC = (Change in TVC) / (Change in Output)

Marginal cost of increasing output from 6 to 7 is 120.

Second way: calculating MC from TC

Output	AFC	AVC	TVC	TFC	TC	MC
1	50	100	100	50	150	NA
2	25	80	160	50	210	60
3	16.67	66.67	200	50	250	40
4	12.5	65	260	50	310	60
5	10	68	340	50	390	80
6	8.37	73.33	440	50	490	100
7	6.14	80	560	50	610	120
8	6.25	86.5	692	50	742	132

TFC = AFC * Output

TC = TVC + TFC
MC = (Change in TC) / (Change in Output)

Marginal cost of increasing output from 6 to 7 is 120.

There is no difference in the MC value whether it is calculated by TVC or TC.

Calculation of MR

Output	Price	TR	MR
1	115	115	NA
2	115	230	115
3	115	345	115
4	115	460	115
5	115	575	115
6	115	690	115
7	115	805	115
8	115	920	115

TR = PRICE * OUTPUT

MR = (Change in TR) / (change in output)

Marginal Revenue of increasing from 6 to 7 is 115.