If the total cost of producing 6 units is $228 and the total cost of producing 7
ID: 1204741 • Letter: I
Question
If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245, what is the marginal cost of producing the seventh unit?
a.
$35
b.
$245
c.
$3
d.
$38
e.
$17
Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is:
a.
inelastic, and total revenue will increase.
b.
elastic, and total revenue will increase.
c.
inelastic, and total revenue will decrease.
d.
elastic, and total revenue will decrease.
e.
unit elastic, and total revenue will remain the same.
The marginal product of labor can be defined as:
a.
the change in profit divided by the change in labor, other factors of production held constant.
b.
the change in total output divided by the change in labor, other factors of production held constant.
c.
the total output divided by the total labor utilized.
d.
the change in labor utilized divided by the change in total output, other factors of production held constant.
e.
the change in labor divided by the change in the total cost, other factors of production held constant.
a.
$35
b.
$245
c.
$3
d.
$38
e.
$17
Explanation / Answer
1.
TC(6) = 228
TC(7) = 245
Use the following formula to calculate MC:
MC(n) = TC(n) – TC(n-1)
Thus,
MC(7 = TC(7) – TC(6) = 245 – 228 = $17
Hence, correct option is (d) $17
2.
Elasticity = % change in Q/% change in P = 20%/10% = 2
Since elasticity is greater than 1, it is highly elastic.
Using TR test, it is known that in case of elastic demands, price cuts lead to increased revenues.
Hence, correct option is (b) elastic, and total revenue will increase.
3.
Marginal product of labor is the change in output when an additional unit of labor is employed.
Hence, correct option is (b) the change in total output divided by the change in labor, other factors of production held constant.