Question 1

Which of the following best defines marginal cost?

Accepted Answer

The additional cost incurred from producing one more unit of output.

Question 2

Given the marginal cost formula $$MC = \frac{\Delta TC}{\Delta Q}$$, what does $$\Delta TC$$ represent?

Accepted Answer

The change in total cost when output increases by one unit.

Question 3

A surfboard company has the following costs for producing 3 boards: Fixed Cost = $$400, Variable Cost = 600. $$What is the Total Cost?

Accepted Answer

$1000

Question 4

If the marginal cost of producing the 4th unit is $$100, and the total cost of producing 3 units is 1000$$, what is the total cost of producing 4 units?

Accepted Answer

$1100

Question 5

Suppose the marginal product of labor is increasing. What happens to marginal cost?

Accepted Answer

Marginal cost decreases.

Question 6

A firm’s marginal cost curve initially falls and then rises as output increases. What shape does this create?

Accepted Answer

A U-shape.

Question 7

If a company’s average total cost for 600 units is $$301, and the marginal cost of producing the 601st unit is 250$$, should the company accept an offer to sell the 601st unit for $550?

Accepted Answer

Yes, because the price is above marginal cost.

Question 8

Which of the following best explains why marginal cost eventually increases as output rises?

Accepted Answer

Diminishing marginal product of labor.

Question 9

If the total cost of producing 5 units is $$1,200 and the total cost of producing 6 units is 1$$,350, what is the marginal cost of the 6th unit?

Accepted Answer

$150

Question 10

A surfboard shaper leases two machines at $$200 each per week. If he produces 4 boards with a variable cost of 800$$, what is his average total cost?

Accepted Answer

$300

Question 11

If marginal cost is below average total cost, what happens to average total cost as output increases?

Accepted Answer

Average total cost decreases.

Question 12

Which of the following is true about fixed costs in the short run?

Accepted Answer

Fixed costs do not change as output increases.

Question 13

If the marginal cost of producing the 5th unit is $$120 and the average total cost at 5 units is 100$$, what can you infer about the direction of average total cost?

Accepted Answer

Average total cost is rising.

Question 14

A firm’s total cost increases from $$800 to 950 $$when output increases from 4 to 5 units. What is the marginal cost of the 5th unit?

Accepted Answer

$150

Question 15

If a firm’s marginal cost curve intersects its average total cost curve at $$Q = 10$$, what does this point represent?

Accepted Answer

The minimum point of the average total cost curve.

Marginal Cost in Microeconomics: Concepts, Calculations, and Applications

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