If the total cost of producing 10 units equals $90 and the average total cost of producing 11 units equals $8.75, then what is the marginal cost of the eleventh unit produced?
A) It is greater than the average total cost of producing ten units.
B) It is less than the marginal cost of producing the tenth unit.
C) It is less than the average total cost of producing ten units.
D) It is greater than the marginal cost of producing the tenth unit.

Question

Quizplus · Accepted Answer

Marginal cost is the change in total cost divided by the change in quantity. In this case, the change in total cost is $90 - $8.75 = $81.25, and the change in quantity is 11 - 10 = 1. Therefore, the marginal cost of the eleventh unit produced is $81.25 / 1 = $81.25. This is less than the average total cost of producing ten units, which is $90 / 10 = $9.

If the Total Cost of Producing 10 Units Equals $90