Question

The cost for system 1 of dispensing maps is:
Y = 0.4 X +  8000, where Y = Total Costs in $, X=total number of maps dispensed (in a year).At 5000 maps per year, what is the marginal cost and what is the average cost?
[Tip: marginal cost means what is your additional cost by dispensing one more map. average cost means what is the cost per one map [for 5000 maps total]]

Answer 1

Given cost function (Y) is:

Y = 0.4 X + 8000

For average cost, first we will find total cost by putting the value of X as 5000 in the above function as per below:

Total cost (Y) = (0.4 * 5000) + 8000

Total cost (Y) = 2000 + 8000 = $10000

So, total cost of 5000 maps is $10000

now,

Average cost = Total cost / Number of maps

Average cost = $10000 / 5000 = $2

For marginal cost, we need to differentiate the given cost function:

Y = 0.4X + 8000

dY / dX = 0.4

So, marginal cost is $0.4