Answer to Question #148904 in Microeconomics for Ellen

Question

A firm's fixed costs are €3,000. If total costs are €4,000 for one unit of output and €4,200 for two units, what is the marginal cost of the second unit?

Answer 1

Fixed costs = €3,000.

For one unit

Total costs for one unit of output = €4,000

Total cost : Fixed cost + Variable cost = €4,000

Variable cost of one unit : €4,000 - €3,000 = €1,000

For second unit

Total costs for two unit of output = €4,200

Total cost : Fixed cost + Variable cost = €4,200

Variable cost of two units : €4,200 - €3,000 = €1,200

Therefore, the marginal cost of the second unit = €1,200 -€1,000

= €200