Example of calculating marginal costs

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Reference no: EM131170722

Let's work on an example of calculating Marginal Costs. The book describes Marginal Costs as the additional cost incurred when the output is increased by one unit. However, sometimes in the real world information isn't available for increases of single units, rather it is available only for larger increases. So, suppose we have the following information about the costs of a firm: Quantity Total Cost 300 $1700 500 $2500 650 $3250 This means that the total costs for the company would be $2500 if it decided to produce 500 units of output and $3250 if it decided to produce 650. We can still calculate a Marginal Cost of the 650th unit, but it will have to be the Marginal Cost (per unit) of units 501 to 650. Note that we still want to put the Marginal Cost on a per-unit basis. So to do that, we will take the change in costs from increasing the output from 500 to 650 and divide by the change in quantity. Also note that we want to use data for the smallest gap possible. So while we have data for other levels of output, we will use data for the nearest quantity (500) and ignore the others (350)

1. Step one is to calculate the change in total costs. In the box below, enter in the change in total costs (omitting the dollar sign)

Reference no: EM131170722

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