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Marginal Cost and Benefit Analysis
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What is the marginal cost of producing one additional unit of a good if the total cost of producing 100 units is $1,000 and the total cost of producing 101 units is $1,020?

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Choose the Best Answer

A

$20

B

$10

C

$15

D

$25

Understanding the Answer

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Answer

Marginal cost is the extra cost of producing one more unit of a good. To find it, you look at the change in total cost when you increase production. In this case, the total cost for producing 100 units is $1,000, and for 101 units, it is $1,020. The difference in cost is $1,020 minus $1,000, which equals $20. Therefore, the marginal cost of producing one additional unit, or the 101st unit, is $20.

Detailed Explanation

The marginal cost is the extra cost to make one more unit. Other options are incorrect because This answer might come from thinking the cost increase is smaller than it is; This choice could come from averaging costs or guessing.

Key Concepts

Marginal cost
Topic

Marginal Cost and Benefit Analysis

Difficulty

easy level question

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understand

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