Suppose that when the level of output for the firm increases from 50 to 60​ units, its variable costs increase from​ $500 to​ $700. What is the​ firm's marginal​ cost?

Question

Part 2
A.
​$115
B.
​$10
C.
​$20
D.
​$5

Answer 1

To calculate the firm's marginal cost, we need to find the change in variable costs divided by the change in output.

Change in variable costs = $700 - $500 = $200
Change in output = 60 - 50 = 10 units

Marginal cost = Change in variable costs / Change in output
Marginal cost = $200 / 10 units
Marginal cost = $20

Therefore, the firm's marginal cost is $20. Answer choice C.