Question

Tony is the owner of tony’s taqueria. Tony is a profit-maximizing owner whose firm operates in a competitive market. An additional worker costs tony $200 and has a marginal productivity of 40 tacos. Assuming no other variable costs, what is the marginal cost of a taco?.

Answer 1

Assuming no other variable costs, the marginal cost of a taco is; $5

Formula for marginal cost is;

Marginal cost = change in cost/change in quantity

We are told the cost of hiring an additional worker is $200.

Thus; change in production cost = $200

We are told that the marginal productivity is 40 tacos. This marginal productivity of the change is cost is the change in quantity.

Thus;

Change in quantity = 40

Finally,

marginal cost = $200/40

Marginal cost = $5

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