A printing press operating in the short run has a Total Fixed Cost (\text{TFC}) of \text{₦… — JAMB UTME

A printing press operating in the short run has a Total Fixed Cost ( $\text{TFC}$ ) of $\text{₦}1,200$ . When producing $100$ brochures, its Total Cost ( $\text{TC}$ ) is $\text{₦}3,200$ . If the output increases to $150$ brochures and its Total Variable Cost ( $\text{TVC}$ ) rises to $\text{₦}3,500$ , what is the Marginal Cost ( $\text{MC}$ ) per additional brochure produced?

A
$\text{₦}70$
$\text{₦}30$ Answer
C
$\text{₦}94$
D
$\text{₦}1,500$

Answer

The Marginal Cost per additional brochure produced is

\text{₦}30

At an output of

100

units,

\text{TVC}_1 = \text{TC}_1 - \text{TFC} = \text{₦}3,200 - \text{₦}1,200 = \text{₦}2,000

. When output increases to

150

units,

\text{TVC}_2 = \text{₦}3,500

. The increase in cost (

\Delta \text{TC} = \Delta \text{TVC}

) is

\text{₦}3,500 - \text{₦}2,000 = \text{₦}1,500

. Dividing this by the output change (

\Delta Q = 150 - 100 = 50

) yields

\text{MC} = \frac{\text{₦}1,500}{50} = \text{₦}30

Step-by-Step Solution

Calculate initial Total Variable Cost (

\text{TVC}_1

) at

Q_1 = 100

\text{TVC}_1 = \text{TC}_1 - \text{TFC} = \text{₦}3,200 - \text{₦}1,200 = \text{₦}2,000

Total cost is the sum of total fixed cost and total variable cost.

Calculate the change in cost (

\Delta \text{TC}

\Delta \text{TVC}

) and change in quantity (

\Delta Q

)

\Delta \text{TVC} = \text{TVC}_2 - \text{TVC}_1 = \text{₦}3,500 - \text{₦}2,000 = \text{₦}1,500

;

\Delta Q = 150 - 100 = 50

units

Fixed cost does not change with output, so any change in total cost is entirely due to changes in variable cost.

Calculate Marginal Cost (

\text{MC}

)

\text{MC} = \frac{\Delta \text{TC}}{\Delta Q} = \frac{\text{₦}1,500}{50} = \text{₦}30

Marginal Cost is defined as the addition to total cost resulting from producing one additional unit of output.

Key Concept

Short-Run Marginal Cost Calculation

Estimated Time:1m 0s

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