Refer to Table 1 below: Table 1: Production Costs of the Firm A
[table]
Quantity of output per hour | Total Fixed Costs per hour($) | Total Variable Costs per hour ($) | Marginal Cost per hour of the…. ($) | Average Cost per hour ($) 0 | 250 | 0 | N/A | N/A 1 | 250 | 25 | 1st item = 25 | 275 2 | 250 | 43 | 2nd item = 18 | 146.50 3 | 250 | 58 | 3rd item = 15 | 102.67 4 | 250 | 75 | 4th item = 17 | 81.25 5 | 250 | 95 | 5th item = 20 | 6 | 250 | 126 | 6th item = | 62.67
[/table] What is the marginal cost of the 6th item?

Question

Refer to Table 1 below: Table 1: Production Costs of the Firm A
[table]
Quantity of output per hour | Total Fixed Costs per hour($) | Total Variable Costs per hour ($) | Marginal Cost per hour of the…. ($) | Average Cost per hour ($) 0 | 250 | 0 | N/A | N/A 1 | 250 | 25 | 1st item = 25 | 275 2 | 250 | 43 | 2nd item = 18 | 146.50 3 | 250 | 58 | 3rd item = 15 | 102.67 4 | 250 | 75 | 4th item = 17 | 81.25 5 | 250 | 95 | 5th item = 20 |  6 | 250 | 126 | 6th item = | 62.67
[/table] What is the marginal cost of the 6th item?

BlackTom AI · Accepted Answer

Let’s break down what the table is telling us and how to compute the marginal cost for the 6th item.
First, recall that marginal cost is the increase in total cost when one additional unit (or one more hour of output) is produced.
For the 5th and 6th items, the firm has the same total fixed costs of 250, so any change in total cost comes from the change in total variable costs.
From the table, Total Variable Costs per hour for the 5th item are 95 and for the 6th item are 126. The corresponding Total Cost would be Fixed Costs plus Variable Costs: for 5th item, 250 + 95 = 345; for 6th item, 250 + 126 = 376.
Now compute the marginal cost of going from 5th to 6th: 376 − 345 = 31.
With that in mind, evaluate the provided options:
- Option a. 31: This matches the arithmetic increase in total cost between the 5th and 6th items, so it is the correct marginal cost.
- Option b. 62.67: This value appears to be the average cost per hour at the 6th output level (given elsewhere in the table), not the marginal cost, and thus is not the correct marginal increment.
- Option c. 0: An marginal cost of zero would imply no change in total cost with an extra unit, which contradicts the positive increase in variable costs from 95 to 126.
- Option d. 126: This is the total variable cost for the 6th item alone, not the additional cost of producing the 6th item, so it does not represent marginal cost.
In summary, the marginal cost of moving from 5th to 6th item is the increase in total cost, which is 31, as calculated from the fixed cost being constant and the variable cost rising from 95 to 126.

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