Multiple Choice
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?
47
views
10. The Costs of Production
Marginal Cost
Struggling with Microeconomics?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Marginal cost includes which of the following?
A
The additional variable cost incurred from producing one more unit of output
B
The total fixed cost of production
C
The sunk cost from previous production decisions
D
The average total cost of all units produced
Verified step by step guidance1
Understand the definition of marginal cost: Marginal cost is the additional cost incurred from producing one more unit of output.
Recall that fixed costs do not change with the level of output, so total fixed cost is not part of marginal cost.
Recognize that sunk costs are past costs that cannot be recovered and do not affect current production decisions, so they are excluded from marginal cost.
Note that average total cost is the total cost divided by the number of units produced, which differs from marginal cost as it is not about the cost of one additional unit.
Conclude that marginal cost specifically refers to the additional variable cost incurred when increasing production by one unit.
Related Videos
Related Practice
