Suppose Honda's total cost of producing 4 cars in $225000 and its total cost of producing
5 cars in $250000. What is the average total cost of producing 5 cars? What is the
marginal cost of 5th car?
To find the average total cost of producing 5 cars, we need to divide the total cost by the number of cars produced.
Average Total Cost = Total Cost / Number of Cars
In this case, the total cost of producing 5 cars is $250,000, and the number of cars produced is 5.
Average Total Cost = $250,000 / 5 = $50,000
Therefore, the average total cost of producing 5 cars is $50,000.
To find the marginal cost of the 5th car, we need to calculate the difference in total cost when producing 5 cars and 4 cars.
Marginal Cost = Total Cost of 5 cars - Total Cost of 4 cars
In this case, the total cost of producing 5 cars is $250,000, and the total cost of producing 4 cars is $225,000.
Marginal Cost = $250,000 - $225,000 = $25,000
Therefore, the marginal cost of the 5th car is $25,000.