ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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![The image contains a cost table used to calculate costs associated with various levels of output. The table and question are structured for educational purposes, focusing on cost analysis.
**Table:**
| Output | Fixed Cost | Average Fixed Cost | Variable Cost | Average Variable Cost | Total Cost | Average Total Cost | Marginal Cost |
|--------|------------|--------------------|---------------|-----------------------|------------|--------------------|---------------|
| 0 | $15,000 | | $0 | | | | |
| 100 | $15,000 | | $3,000 | | | | |
| 200 | $15,000 | | $5,000 | | | | |
| 300 | $15,000 | | $6,000 | | | | |
| 400 | $15,000 | | $8,000 | | | | |
| 500 | $15,000 | | $12,000 | | | | |
**Question:**
"Referring to the cost table above, what is the Marginal Cost of increasing quantity produced from 400 to 500 units?"
**Options:**
- $57
- $40
- $27,000
- $20
**Conceptual Explanation:**
- **Fixed Cost:** Cost that remains constant regardless of output.
- **Variable Cost:** Cost that changes with the level of output.
- **Marginal Cost:** The cost of producing one more unit.
To answer the question, you identify the change in variable cost and output between 400 and 500 units. The marginal cost is calculated by the change in total cost divided by the change in quantity:
\[
\text{Marginal Cost} = \frac{\text{Variable Cost at 500} - \text{Variable Cost at 400}}{\text{Output at 500} - \text{Output at 400}} = \frac{12,000 - 8,000}{500 - 400} = \frac{4,000}{100} = 40
\]
Therefore, the Marginal Cost is $40.](https://content.bartleby.com/qna-images/question/754ff730-fe82-4675-92c3-35bf56a05328/4061693c-2ea7-42fe-95e7-e76771591bf2/8thrk8o.jpeg)
Transcribed Image Text:The image contains a cost table used to calculate costs associated with various levels of output. The table and question are structured for educational purposes, focusing on cost analysis.
**Table:**
| Output | Fixed Cost | Average Fixed Cost | Variable Cost | Average Variable Cost | Total Cost | Average Total Cost | Marginal Cost |
|--------|------------|--------------------|---------------|-----------------------|------------|--------------------|---------------|
| 0 | $15,000 | | $0 | | | | |
| 100 | $15,000 | | $3,000 | | | | |
| 200 | $15,000 | | $5,000 | | | | |
| 300 | $15,000 | | $6,000 | | | | |
| 400 | $15,000 | | $8,000 | | | | |
| 500 | $15,000 | | $12,000 | | | | |
**Question:**
"Referring to the cost table above, what is the Marginal Cost of increasing quantity produced from 400 to 500 units?"
**Options:**
- $57
- $40
- $27,000
- $20
**Conceptual Explanation:**
- **Fixed Cost:** Cost that remains constant regardless of output.
- **Variable Cost:** Cost that changes with the level of output.
- **Marginal Cost:** The cost of producing one more unit.
To answer the question, you identify the change in variable cost and output between 400 and 500 units. The marginal cost is calculated by the change in total cost divided by the change in quantity:
\[
\text{Marginal Cost} = \frac{\text{Variable Cost at 500} - \text{Variable Cost at 400}}{\text{Output at 500} - \text{Output at 400}} = \frac{12,000 - 8,000}{500 - 400} = \frac{4,000}{100} = 40
\]
Therefore, the Marginal Cost is $40.
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