A firm has a fixed cost of $700 in its first year of operation. When the firm produces 99 units of output, its total costs are $4,000. The marginal cost of producing the 100th unit of output is $200. What is the total cost of producing 100 units?
A)$42
B)$900
C)$4,200
D)$4,900

Question

Quizplus · Accepted Answer

We know that the firm has a fixed cost of $700 in its first year of operation. 
When the firm produces 99 units of output, its total costs are $4,000. This means that the variable costs of producing 99 units are:
Total costs - Fixed costs = Variable costs
$4,000 - $700 = $3,300
To find the total cost of producing 100 units, we can use the equation for marginal cost:
Marginal cost = Change in total cost / Change in output
We know that the marginal cost of producing the 100th unit of output is $200, so we can set up the equation as:
$200 = (Total cost of producing 100 units - Total cost of producing 99 units) / 1
Simplifying this equation, we get:
Total cost of producing 100 units - Total cost of producing 99 units = $200
We already know that the total cost of producing 99 units is $4,000, so we can substitute that value in:
Total cost of producing 100 units - $4,000 = $200
Total cost of producing 100 units = $4,200
Therefore, the total cost of producing 100 units is $4,200.

A Firm Has a Fixed Cost of $700 in Its