If the total cost of production for 1000 widgets is $2000 and marginal cost is constant at $1,what is the average cost if 2000 widgets are produced?
A)$2
B)$1.50
C)$1
D)$0.50

Question

Quizplus · Accepted Answer

Marginal cost is the cost of producing an additional unit of output. It is given that the marginal cost is constant at $1. If the total cost of production for 1000 widgets is $2000, then the average cost of producing each of these 1000 widgets is:

Average cost = total cost / quantity = $2000 / 1000 = $2

Now, if 2000 widgets are produced, the total cost will be:

Total cost = (cost of producing 1000 widgets) + (cost of producing additional 1000 widgets)
Total cost = $2000 + (1000 x $1) = $3000

Therefore, the average cost of producing each of the 2000 widgets is:

Average cost = total cost / quantity = $3000 / 2000 = $1.50

Hence, the best choice is B) $1.50.

If the Total Cost of Production for 1000 Widgets Is