Question
TB MC Qu. O9-265 If the total variable cost... If the total variable cost of 9 units of output is \( \$ 90 \) and the total variable cost of 10 units of output is \( \$ 120 \), then Multiple choice the marginal cost of the tenth unit is \( \$ 90 \). the average variable cost of 9 units is \( \$ 10 \). the firm is operating in the range of increasing marginal returns. thariable cost of 10 units is \( \$ 10 \). the ther
Ask by Watkins Lang. in the United States
Mar 20,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The average variable cost for 9 units is \$10.
Solution
1. The average variable cost (AVC) for 9 units is calculated as
\[
\text{AVC} = \frac{\text{Total Variable Cost}}{\text{Output}} = \frac{90}{9} = 10.
\]
2. The marginal cost (MC) for the tenth unit is the change in total variable cost when output increases from 9 to 10 units:
\[
\text{MC}_{10} = 120 - 90 = 30.
\]
3. Since the marginal cost of the tenth unit (\(30\)) is larger than the average variable cost at 9 units (\(10\)), the firm is operating in the range of diminishing marginal returns, not increasing marginal returns.
4. Among the choices provided, the correct statement is that the average variable cost of 9 units is \(\$10\).
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Simplify this solution Extra Insights
To find the marginal cost of the tenth unit, we can subtract the total variable cost of 9 units from that of 10 units. So, \( \$ 120 - \$ 90 = \$ 30 \). Therefore, the marginal cost of producing the tenth unit is actually \( \$ 30 \), not \( \$ 90 \). Now, for the average variable cost (AVC) of 9 units, we divide the total variable cost by the number of units. Thus, \( \frac{\$ 90}{9} = \$ 10 \). This statement holds true! So, while the first option is incorrect, you'll be smart to choose the statement about the average variable cost being \( \$ 10 \).
