Asked by Bianca Benincasa on May 07, 2024
Verified
(Table: Costs of Birthday Cakes) Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the marginal cost of the fourth cake?
A) $8
B) $10
C) $25
D) $35
Marginal Cost
The extra expense associated with manufacturing an additional unit of a product.
Fixed Costs
Costs that do not change with the level of output produced, such as rent, salaries, and insurance premiums.
Birthday Cakes
Specialized cakes decorated and made to celebrate a person's birthday.
- Comprehend the principle of marginal cost and its significance in making production choices.
Verified Answer
EH
Elvis HarizajMay 09, 2024
Final Answer :
A
Explanation :
The marginal cost of producing an additional unit (in this case, the fourth cake) is the change in total cost when one more unit is produced. Since fixed costs do not change with the level of production, the marginal cost is determined by the change in variable costs alone. Without the specific numbers from the table, a general explanation is that if the cost of the third cake and the cost of the fourth cake are known, the marginal cost of the fourth cake would be the difference in total cost between producing three cakes and four cakes, excluding the fixed cost of $10. Given the answer, it suggests that the cost associated with producing the fourth cake (beyond the cost of the first three cakes) is $8.
Learning Objectives
- Comprehend the principle of marginal cost and its significance in making production choices.
Related questions
(Table: Output and Costs)Use Table: Output and Costs ...
(Table: Costs of Producing Bagels)Use Table: Cost of Producing Bagels ...
(Table: Costs of Producing Bagels)Use Table: Cost of Producing Bagels ...
(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes ...
A Firm Will Begin to Experience Diminishing Returns at the ...