A company could produce 100 units of a good for $320 or produce 101 units of the same good for $324

Economics Dec 15, 2020

A company could produce 100 units of a good for $320 or produce 101 units of the same good for $324. The $4 difference in costs is

A. the marginal benefit of producing the 101st unit.

B. the marginal cost of producing the 101st unit.

C. both the marginal benefit and the marginal cost of producing the 101st unit.

D. neither the marginal benefit nor the marginal cost of producing the 101st unit.

Expert Solution

Answer: B

In this case, we are told total cost increased from $320 to $324. We are not told anything about revenue. Thus, the change in total costs which was $4 is marginal cost since we are measuring the change in the cost of production.

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