Question

In: Economics

Quantity Total Cost 495 1500 496 1505 497 1512 498 1520 499 1530 500 1545 501...

Quantity	Total Cost
495	1500
496	1505
497	1512
498	1520
499	1530
500	1545
501	1562
502	1580

23. The table above shows the total cost for Happy Cows, a perfectly competitive dairy farm, at various levels of production. The market price for Happy Cows dairy is $10 per unit of dairy product.

What is the marginal revenue of producing the 500th unit of dairy product?

A. $10

B. $15

C. $1,545

D. $5,000

24. The table shows the total cost for Happy Cows, a perfectly competitive dairy farm, at various levels of production. The market price for Happy Cows dairy is $10 per unit of dairy product. What is the marginal cost of producing the 500th unit of dairy product?

A. $1,545

B. $5,000

C. $15

D. $10

Expert Solution

23. The correct answer is $10

In perfectly competitive market, each firm is a price taker. All the firms have to accept the same price as determined by market forces of demand and supply. As a result uniform price prevails in the market. It means, revenue from every additional unit (known as marginal revenue) is equal to price. Price is given $10. Since price is equal to marginal revenue, therefore marginal revenue is $10.

24. The correct answer is $15

Marginal cost is the change in total cost when an additional unit of output is produced.

Marginal cost of producing 500th unit = Total cost of producing 500th unit - Total cost of producing 499th unit

Marginal revenue = $1545 - $1530 = $ 15

Rahul Sunny answered 3 years ago

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