Question

A firm's average total cost is minimized when it produces 10 units. When it produces 10 units, the average total cost is $5/unit. What is the marginal cost when the firm produces 10 units

Answer 1

$5/unit

Step-by-step explanation:

In the theory of production cost, the relationships between average total cost and marginal cost are as follows:

1. When the average cost is increasing, the marginal cost will be greater than the average cost.

2. When the average cost is decreasing, the marginal cost will be less than the average cost.

3. When the average cost at the minimum, the marginal cost equals the average cost.

Based on number 3 above, the marginal cost when the firm produces 10 units is $5/unit since the firm's average total cost is minimized when it produces 10 units.