Question

As a recently hired analyst, you have determined that the average cost per unit is $4.12....

As a recently hired analyst, you have determined that the average cost per unit is $4.12. Your firm produces 1,146 units of production. When your firm increases to 4,450 units of production, the average cost per unit changes to $15.38. What is the marginal cost associated with the increase in production from 1,146 units to 4,450 units? As before, make sure you state your answer in numeric form.

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Answer #1

Initial Average Cost =$4.12

Initial units of production=1,146

Increased Average cost=$15.38

Increased units of production=4,450

We have to find the marginal cost associated with the increased production

Marginal cost =(Change in cost)/(Change in production)

Thus for the above example

Change in cost=$15.38-$4.12

Change in cost =$11.26

Change in production =4,450-1,146

Change in production=3,304

Marginal Cost =11.26/3304

Marginal Cost =$0.0034

The Marginal Cost for increased production is $0.0034

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