Question

Widgets Inc. produces widgets. If Widget's Fixed Costs are $16,000 and it's Average Variable Costs are...

Widgets Inc. produces widgets. If Widget's Fixed Costs are $16,000 and it's Average Variable Costs are constant at $80, the between a production quantity of 50 widgets and a production quantity of 60 widgets the marginal costs are:

$320

$80

$320

impossible to calculate with the information given

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Answer #1

In the given question TFC is given to be 16000

And AVC = 80 which is constant throughout

No TC= TFC + TVC

TVC/Q = AVC or AVC * Q = TVC

Therefore TVC at 50 units = 80 * 50 = 4000

TVC at 60 units = 80 * 60 = 4800

Therefore TC at 50 units = 16000 + 4000 = 20000

Therefore TC at 60 units = 16000 + 4800 = 20800

Now MC = change in TC / change in output

= TC at 60 units - TC at 50 units/ Change in no of units

= 20800 - 20000/ 60 - 50

800/10 = 80

Therefore the MC is $80 between production at 50 units and 60 units.

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