What is the marginal cost of a string

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Reference no: EM131044011

Licorice industry is competitive. The current market price of a string of licorice is $0.50. At this price, a firm decides to produce 2 million strings of licorice this month.

The total fixed cost per month is $400,000 and the average variable cost of $0.40.

a. What is the marginal cost of a string at 2 million strings of production level?

b. Assuming that one month is considered a short run, is the firm's decision to produce 2 million strings of licorice this month right or wrong?

Explain the reason.

Reference no: EM131044011

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