Question

a. Calculate marginal cost using the formula given in the chapter: ATotal cost/AQuantity. Marginal cost Variable cost ($) 0 40 70 110 160 240 Total cost ($) 100 140 170 210 260 340 Quantity 10 20 30 40 50 b. Calculate AVariable cost/AQuantity. AVariable cost/AQuantity Total cost ($) 100 140 170 210 260 340 Variable cost ($) Quantity 0 10 20 30 40 50 40 70 110 160 240

Answer 1

a)

Answer

MC(n)=(TC(n)-TC(p))/(n-p)
MC(n)=marginal cost of n th unit
TC(n)=Total cost of n units of output
TC(p)=Total cost of p unit of output
here, n>p.
MC(10)=(140-100)/(10-0)=4

MC(20)=(170-140)/(20-10)=3 and so on

Q	VC	TC	MC
0	0	100
10	40	140	4
20	70	170	3
30	110	210	4
40	160	260	5
50	240	340	8

b)

Average variable cost =variable cost /quantity

AVC(10)=(40/10)=4

AVC(20)=(70/20)=3.5 and so on

Q	VC	TC	AVC
0	0	100
10	40	140	4
20	70	170	3.5
30	110	210	3.67
40	160	260	4
50	240	340	4.8