Question

11. A company has a fixed cost of $200,000 and a per-unit cost of $35 what is the average cost unit if they per make 400,000 units?

12. Referring to question # 1, what is the Marginal Cost to produce 1 more unit? Please, make sure you answer no 12 and show all work

Answer 1

Answer 1 :- Average Cost Per Unit :-

Given that,

Fixed Cost = $200,000

Cost per unit for producing 400,000 Units = $35

Total cost can be calculated as ;

Total Cost = Fixed cost + Average Variable Cost

Total cost = 200,000+35(400,000)

Total cost = $ 14,200,000

Now average cost per can calculated as;

AC/Unit = Total Cost/Total Number of Units

AC/Unit = 14,200,000/400,000 = $35.5/unit

Hence, the Average Cost per unit will be $35.5

Answer 2 :- Marginal Cost ;

Here the total cost function is given by ;

TC = 200,000 + 35Q, where Q is the quantity produced.

Marginal cost of one more unit can be calculated by Differentiating the TC function with respect to Q, therefore,

dTC/dQ = 35

Thus, the marginal cost of producing one more unit will be $35