Using this table, calculate the marginal cost of each of these quantities of bikes.
| Bikes produced per day | Total cost |
| :----------------------- | :--------- |
| 1 | $80 |
| 2 | $97 |
| 3 | $110 |
| 4 | $130 |
| 5 | $160 |
| 6 | $210 |
| 7 | $270 |
The first bike: $\square$
The fourth bike: $\square$
The sixth bike: $\square$
The seventh bike: $\square$
Answer (2)
The marginal cost of the first bike is the total cost of producing one bike: $80.
The marginal cost of the fourth bike is the difference between the total cost of producing 4 bikes and 3 bikes: $130 - $110 = $20.
The marginal cost of the sixth bike is the difference between the total cost of producing 6 bikes and 5 bikes: $210 - $160 = $50.
The marginal cost of the seventh bike is the difference between the total cost of producing 7 bikes and 6 bikes: $270 - $210 = $60.
T h e f i rs t bik e : $80 , T h e f o u r t hbik e : $20 , T h es i x t hbik e : $50 , T h ese v e n t hbik e : $60
Explanation
Understanding the Problem We are given a table that shows the total cost of producing a certain number of bikes per day. The goal is to calculate the marginal cost for the first, fourth, sixth, and seventh bikes. Marginal cost is the change in total cost when one additional unit is produced.
Marginal Cost of the First Bike The marginal cost of the first bike is simply the total cost of producing one bike, since there were no bikes produced before that. From the table, the total cost of producing one bike is $80. Therefore, the marginal cost of the first bike is $80.
Marginal Cost of the Fourth Bike The marginal cost of the fourth bike is the difference between the total cost of producing four bikes and the total cost of producing three bikes. From the table, the total cost of producing four bikes is $130, and the total cost of producing three bikes is $110. Therefore, the marginal cost of the fourth bike is: M C 4 = $130 − $110 = $20
Marginal Cost of the Sixth Bike The marginal cost of the sixth bike is the difference between the total cost of producing six bikes and the total cost of producing five bikes. From the table, the total cost of producing six bikes is $210, and the total cost of producing five bikes is $160. Therefore, the marginal cost of the sixth bike is: M C 6 = $210 − $160 = $50
Marginal Cost of the Seventh Bike The marginal cost of the seventh bike is the difference between the total cost of producing seven bikes and the total cost of producing six bikes. From the table, the total cost of producing seven bikes is $270, and the total cost of producing six bikes is $210. Therefore, the marginal cost of the seventh bike is: M C 7 = $270 − $210 = $60
Final Answer Therefore, the marginal costs are: The first bike: $80 The fourth bike: $20 The sixth bike: $50 The seventh bike: $60
Examples
Understanding marginal cost is crucial for businesses to make informed decisions about production levels. For example, if a bike company knows the marginal cost of producing an additional bike, they can compare it to the revenue they would receive from selling that bike. If the marginal cost is higher than the revenue, it might not be profitable to increase production. This concept is also applicable in everyday life, such as deciding whether to cook an extra dish for a dinner party based on the additional cost and effort versus the enjoyment it brings to the guests.
The marginal costs are as follows: the first bike is $80, the fourth bike is $20, the sixth bike is $50, and the seventh bike is $60.
;
