Question

Your firm’s cost function for producing plexiglass is given by C(q) = 30 + 5q + 0.25q². You are currently producing q = 4 units, and you receive a request to produce and sell one additional unit. The difference between your marginal cost of producing one more unit and your average variable cost of producing 5 units is _____. (Input a number, such as "56", with no dollar sign or quotation marks.)

Answer 1

Answer : Given,

C = 30 + 5q + 0.25q^2

Here TVC (Total Variable Cost) = 5q + 0.25q^2

AVC (Average Variable Cost) = TVC / q = 5 + 0.25q

MC (Marginal Cost) = C / q = 5 + 0.5q

Given that q = 4 now if one more unit is produced then output will be q = 5. So,

When q = 5,

MC = 5 + (0.5 * 5) = 7.5

AVC = 5 + (0.25 * 5) = 6.25

The difference between marginal cost and average variable cost of producing 5 units = 7.5 - 6.25 = 1.25 .

Therefore, here the difference between marginal cost and average variable cost of producing 5 units is 1.25 .