Question

1- The Variable Cost, (VC), of making 10 fidgets is 100, the Variable Cost, (VC), of making 11 fidgets is 110, What is the Marginal Cost, (MC), of making the 11th fidget?

2- The Total Cost, (TC), of making 10 widgets is 490 , the Total Cost, (TC), of making 11 widgets is 550,What is the Marginal Cost, (ATC), of making the 11th widget?

3- The Total Cost, (TC), of making 10 widgets is 490, the Total Cost, (TC), of making 11 widgets is 550,What is the Average Total Cost, (ATC), of making 11 widgets?

4- The Total Cost, (TC), of making 10 widgets is 490, the Total Cost, (TC), of making 11 widgets is 550,What is the Average Total Cost, (ATC), of making 10 widgets?

5- If Marginal Cost is less than (below) Average Total Cost

		Average Total Cost is decreasing (falling)
		Average Total Cost is at a Minimum
		Average Total Cost is increasing (rising)
		there is no relationship between Marginal Cost and Average Total Cost

6-

If Marginal Cost is greater than (above) Average Total Cost

		Average Total Cost is increasing (rising)
		Average Total Cost is at a Minimum
		Average Total Cost is decreasing (falling)
		there is no relationship between Marginal Cost and Average Total Cos

Answer 1

Question 1

Calculate the marginal cost of 11th fidget -

Marginal cost = Variable cost of 11 fidgets - Variable cost of 10 fidgets

Marginal cost = 110 - 100 = 10

The marginal cost of 11th fidget is 10.

Question 2

Calculate the marginal cost of 11th fidget -

Marginal cost = Total cost of 11 widgets - Total cost of 10 widgets

Marginal cost = 550 - 490 = 60

The marginal cost of 11th widget is 60.

Question 3

Calculate the average total cost of making 11 widgets -

Average total cost = Total cost of making 11 widgets/output

Average total cost = 550/11 = 50

The average total cost of making 11 widgets is 50.

Question 4

Calculate the average total cost of making 10 widgets -

Average total cost = Total cost of 10 widgets/Output

Average total cost = 490/10 = 49

The average total cost of 10 widgets is 49.

Question 5

Marginal cost curve is below the average total cost curve, when both curves are sloping downward.

This means marginal cost is less than average total cost when average total cost is decreasing (falling).

Hence, the correct answer is the option (1).

Question 6

Marginal cost curve is above the average total cost curve, when both curves are sloping upward.

This means marginal cost is less than average total cost when average total cost is increasing (rising).

Hence, the correct answer is the option (1).