Question

Suppose Susan is currently producing 1,000 hotdogs per month at a total cost of ​$200.00. What is her average total cost of​ production? Now suppose Rob increases production to 1,001 pizzas​, and the total cost of production increases to ​$200.08 . What is hishis marginal cost of producing the 1,001thSince the marginal cost of production is less than the average total cost of​ production, the average total cost of production must be

Answer 1

Answer: The answer is as follows:

Explanation:

(1) Average total cost = $\frac{Total\ cost}{Quantity}$

= $\frac{200}{1000}$

= 0.2

(2) Cost of producing an additional unit of hot-dog = 200.08 - 200

= $0.08

∴ Marginal cost of producing the 1,001th is $0.08.

(3) Here, the marginal cost of production is less than the average total cost of production then the average total cost of production must be falling. It is due to the fact that marginal cost is the change in total cost that is arises from the change in the quantity by one unit.

Therefore, Average total cost of production must be falling.