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Which term refers to the additional cost incurred from producing one more unit of output?
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10. The Costs of Production
Marginal Cost
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Refer to the table below. The total cost of producing 199 pizzas is \$1,000, and the total cost of producing 200 pizzas is \$1,008. What is the marginal cost of producing the 200th pizza?
A
\$1,008
B
\$4
C
\$8
D
\$1,000
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Identify the total cost of producing 199 pizzas, which is given as \$1,000.
Identify the total cost of producing 200 pizzas, which is given as \$1,008.
Recall that marginal cost (MC) is the additional cost of producing one more unit, calculated as the change in total cost divided by the change in quantity produced.
Set up the marginal cost formula: \(MC = \frac{TC_{200} - TC_{199}}{200 - 199}\), where \(TC_{200}\) is the total cost at 200 pizzas and \(TC_{199}\) is the total cost at 199 pizzas.
Substitute the values into the formula: \(MC = \frac{1008 - 1000}{1}\), then simplify to find the marginal cost of producing the 200th pizza.
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Which of the following best describes marginal cost and how it is calculated?
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