CA Foundation · Business Economics · Theory of Production and Cost
Total cost of a firm rises from ₹9,000 at 100 units to ₹9,450 when output rises to 110 units. What is the marginal cost per unit over this increase?
Marginal cost is ₹45 per unit. It is the change in total cost divided by the change in output: an increase of ₹450 in cost for 10 extra units. Using ₹450 ignores the division, and ₹90 is merely the earlier average cost.
- A₹45Correct
- B₹90
- C₹85.91
- D₹450
Explanation
MC = change in TC / change in output = (9,450 - 9,000)/(110 - 100) = 450/10 = ₹45. ₹450 is the change in total cost without dividing by the change in output. ₹90 is the earlier average cost, a wrong base.
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