A firm has a fixed cost of $2,000,and at an output of one,variable cost is $1,500.How much is marginal cost at an output of 1?
A)$1,000
B)$1,500
C)$2,000
D)$3,500
E)There is insufficient information to find marginal cost at an output of 1.

Question

Quizplus · Accepted Answer

At an output of 1, the total cost is the sum of fixed cost and variable cost which is $2,000 + $1,500 = $3,500.

Marginal cost is the increase in cost when one additional unit is produced. Mathematically, marginal cost = change in total cost / change in output.

Since output is currently at 1, any increase in output will result in a change of 1. Therefore, the marginal cost at an output of 1 can be calculated as follows:

Marginal cost = (total cost at 2 units - total cost at 1 unit) / (2-1) 
Marginal cost = ($2,000 + $3,000 - $3,500) / 1 
Marginal cost = $2,500 / 1 
Marginal cost = $2,500

However, this question only asks for the marginal cost at an output of 1, which is the variable cost at that output. Therefore, the best choice is B: $1,500.

A Firm Has a Fixed Cost of $2,000,and at an Output