Number of workers: 10, 20, 30

Output(thousands): 3, 5, 6
Fixed Cost ($): 2000, 2000, 2000
Variable Cost ($): 100, 200, 300

In the table above, what is the marginal cost of increasing production from 3,000 to 5,000 units?

1 answer

To find the marginal cost of increasing production from 3,000 to 5,000 units, we need to identify the change in total cost.

First, we need to calculate the total cost for producing 3,000 units and the total cost for producing 5,000 units.

For 3,000 units:
Fixed Cost = $2000
Variable Cost per unit = $100
Number of units = 3,000

Total variable cost = Variable cost per unit * Number of units = $100 * 3,000 = $300,000

Total cost for producing 3,000 units = Fixed Cost + Total variable cost = $2000 + $300,000 = $302,000

For 5,000 units:
Fixed Cost = $2000
Variable Cost per unit = $100
Number of units = 5,000

Total variable cost = Variable cost per unit * Number of units = $100 * 5,000 = $500,000

Total cost for producing 5,000 units = Fixed Cost + Total variable cost = $2000 + $500,000 = $502,000

The change in total cost when increasing production from 3,000 to 5,000 units is:

Change in total cost = Total cost for producing 5,000 units - Total cost for producing 3,000 units
= $502,000 - $302,000
= $200,000

Therefore, the marginal cost of increasing production from 3,000 to 5,000 units is $200,000.