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Direction.

Directions: Answer the questions based on the following information:

ABC Ltd. Produces widgets for which the demand is unlimited and they can sell all of their production. The graph below describes the monthly variable costs incurred by the company as a function of the quantity produced. In addition, operating the plant for one shift results in a fixed monthly cost of Rs. 800. Fixed monthly costs for second shift operation are estimated at Rs. 1200. Each shift operation provides capacity for producing 30 widgets per month.

Note: Average unit cost, AC = Total monthly cost / monthly production, and Marginal cost, MC is the rate of change in total cost for unit change in quantity produced.

110

130

150

160

B. 130

At 40 units the Total cost (TC) = 2000 + 3500 = 5500

Marginal cost (MC) = Change in TC/Change in no of units

To find MC we will check at 2 places at production units of 46. The total cost = 2000 + 4300 = 6300.

At production units of 51, TC = 2000 + 5050 = 7050

MC from 40 to 46 = (6300 5500)/6 =133

MC from 40 to 51 = (7050 5500)/12 = 129

So we cant take the approximate value of MC = 130