Question

It costs $5,000 to produce 10 visits and $6,000 to produce 20. At a volume of 20, what is the average cost and the marginal cost?

Answer 1

Answer:

$300 per unit; $100 per unit

Explanation:

Given that,

costs $5,000 to produce 10 visits

Costs $6,000 to produce 20 visits

At a volume of 20,

Average Cost = Total cost ÷ Total Volume

                       = $6,000 ÷ 20

                       = $300 per unit

Marginal cost = Incremental Cost ÷ Incremental Units

                       = ($6,000 - $5,000) ÷ (20 - 10)

                       = $100 per unit