When a firm produces 50,000 units of output, its total cost equals $6.5 million. when it increases its production to 70,000 units of output, its total cost increases to $9.4 million. within this range, the marginal cost of an additional unit of output is

The marginal cost of an additional unit of output is $145

Explanation:

The computation of marginal cost of an additional unit of output is shown below:

= Change in total cost ÷ change in production level

where,

Change in total cost = Increased cost -  previous cost

                                  = $9.4 million - $6.5 million

                                  = $2.9 million

Thus, change in total cost is $2.9 million

And, change in production level = New production level - existing production level

= 70,000 - 50,000

=20,000

Thus, change in production level  is 20,000

Now,

Apply the above values in the formula which is equals to

=  $2.9 million ÷ 20,000

= $145

Hence, the marginal cost of an additional unit of output is $145

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