0 1 2 3 4 5 6 7 8 Quantity of output 0 20 46 64 72 78 81 80 77 - 20 26 18 8 6 3
ID: 1189313 • Letter: 0
Question
0
1
2
3
4
5
6
7
8
Quantity of output
0
20
46
64
72
78
81
80
77
-
20
26
18
8
6
3
-1
-3
Variable cost (workers)
0
$20
$40
$60
$80
$100
$120
$140
$160
Using the data above, assume the wage per worker is $20, please compute the marginal cost of each additional pair from 72 to 78 pairs of jeans.
I am wondering how to cacluate marginal cost of each additional pair if I wasn't given the total cost? Help...
#of workers0
1
2
3
4
5
6
7
8
Quantity of output
0
20
46
64
72
78
81
80
77
MPP-
20
26
18
8
6
3
-1
-3
Variable cost (workers)
0
$20
$40
$60
$80
$100
$120
$140
$160
Explanation / Answer
When output = 72, number of workers = 4.
Total wage = 4 x $20 = $80
When output = 78, number of workers = 5
Total wage = 5 x $20 = $100
Since there is no other cost than the Wae cost (the only variable cost), Total Cost = Variable Cost (= Total wage).
So, for output = 72, Total cost = $80
When Output = 78, Total Cost = $100
So,
Marginal Cost per unit = Increase in Total Cost / Increase in output
= $(100 - 80) / (78 - 72)
= $20 / 6
= $3.33
Note: Always keep this in mind that, if there is only 1 type of cost given in a question and no other cost is mentioned, that is the only cost of production, and you need to treat it as total cost (as is the case here).