A Firm Has a Fixed Cost of $500 in Its

question 492

Multiple Choice

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

• A)$250
• B)$275
• C)$340.91
• D)$350

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Definitions:

Capitalist Form

A socio-economic system characterized by private ownership of capital goods, investments determined by private decision, and prices, production, and the distribution of goods determined mainly by competition in a free market.

Mixed Economy

An economic system combining private and public enterprise.

Private Sector

Refers to the part of the economy that is run by individuals and companies for profit and is not state controlled.

Public Sector

The part of the economy comprising government services and publicly operated enterprises, funded by taxation.