Question

Acme Home Builders, Inc., has build 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?
The marginal cost of the 25th house, if it is built, will equal $250,000

Answer 1

Answer:

25th house's Marginal cost is $250,000.

Explanation:

Given:

Total cost of 24 houses = $4,800,000

Total cost of 25 houses = $5,050,000

Marginal cost = ?

Computation of marginal cost:

Marginal cost = Change in total cost

Marginal cost = Total cost of 25 houses - Total cost of 24 houses

Marginal cost = $5,050,000 - $4,800,000

Marginal cost = $250,000

So, we say that 25th house's marginal cost will be $250,000 .