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Unformatted text preview: or $5,200. The average total cost when Q is 40 is $5,200 40, or $130. C is the average variable cost, AVC, when output, Q, equals 40. Use the result that AFC + AVC = ATC by rearranging to give AVC = ATC -AFC. As a result, average variable cost equals $130 -$30, which is $100. E is the marginal cost, MC, when output increases from 40 units to 50 units. Marginal cost, MC, equals the change in total cost divided by the change in quantity, or MC = TC Q. To calculate marginal cost, the total cost when output is 40 and the total cost when output is 50 are needed. Average total cost equals total cost divided by output, or ATC = TC Q. Rearranging gives TC = ATC Q. So the total cost when 40 units are produced is $130 40, which is $5,200 and total cost when 50 units are produced is $132 50, which is $6,600. So the marginal cost equals ($6,600 -$5,200) 10, which equals $140....
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- Fall '08