Question

Your production of widgets is governed by a production cost equation, cost per unit = $1...

Your production of widgets is governed by a production cost equation, cost per unit = $1 + $5,000/(x+1000) where x is the number of goods produced. If you are currently selling 3,000 units at a price $3.72 per widget, what is the marginal cost of selling an additional unit

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Answer #1

Solution:

Cost per unit =

Marginal cost = The change in a firms Total Cost resulting from a unit change in output.

a) Total cost for producing 3,000 units

Cost Per Unit = 1 + 5000/(3000 + 1000) = $2.25 <-- This is when 3000 units are being produced

Total Cost = 2.25 * 3000 = $6750 ----------[A]

b) Total cost for producing 3001 units

Cost Per Unit = 1 + 5000/(3001 + 1000) = $2.24968757810547 <-- This is when 3001 units are being produced

Total Cost = $2.24968757810547 * 3001 = $6751.31242189453----------[B]

Marginal Cost = B - A = $6751.31242189453 - $6750 = $1.31242189452587

--x--

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