Question

Output Fixed Cost Variable Cost
1 $5 $10
2 $5 $27
3 $5 $55
4 $5 $91
5 $5 $145

(a) What is the total cost when output is 2?
(b) What is the marginal cost of the third unit?
(c) How much should this firm produce if the market price is $24?

Answer 1

a) when output is 2, from your table, total fixed costs are $5 and total variable costs are $27. Simple arithmatic.
b) marginal cost is the change in cost from a marginal (e.g., 1 unit) change in production.
c) always always always, profit is maximized when marginal cost=marginal revenue.