Question

The following accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase.

CPU GHz	Total Benefit	Marginal Benefit	Total Cost	Marginal Costs
2.0	$1,000		$900
2.5	$1,400			$100
3.0		$300	$1,200
3.5	$1,900		$1,500
4.0	$2,000			$400

The marginal cost of upgrading from a 2.5GHz to 3.0GHz computer is:

$400

$300

$200

$100

Answer 1

Answer. option c is correct i.e. $200

Marginal cost is the addition to the total cost. Using the definition, the following cost schedule is prepared

		dTotal Cost (Change in total cost)
CPU GHZ	Total Cost	Marginal Cost
2	900
2.5	1000	100
3	1200	200
3.5	1500	300
4	1900	400

From the above schedule we observe that marginal cost of upgrading from 2.5 GHZ to 3.0 GHZ computer is $200