Afirm has a fixed cost of $500 in its first year of operation. when the firm produces 100 units of output, its total costs are $3,500. when it produces 101 units of output, its total costs are $3,750. what is the marginal cost of producing the 101st unit of output?

The answer is $250

Explanation:

Marginal cost is the cost that arises as a result of producing one additional unit of output. It is calculated as

Change in total cost/change in output

Change in total cost = 3,750 - 3,500

= 250

Change in output = 101-100 = 1

Divide total cost by the output, we have

250/1

= 250

Therefore the marginal cost is $250

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