CMA Foundation · Fundamentals of Business Economics and Management · Cost of Production
A firm produces 10 units at a total cost of ₹500 and 11 units at a total cost of ₹540. What is the marginal cost of the 11th unit?
The marginal cost of the 11th unit is ₹40. Marginal cost is the addition to total cost from producing one extra unit, so it is the difference between ₹540 and ₹500. Average cost figures divide total cost by output and do not measure the extra cost.
- A₹40Correct
- B₹49.09
- C₹50
- D₹540
Explanation
Marginal cost is the change in total cost from producing one more unit: 540 − 500 = ₹40. The figure ₹49.09 is the average cost of 11 units (540/11), which is a different measure. ₹50 is the average cost at 10 units.
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