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How do I calculate the following microeconomics problem? A firm is producing 20 units with an average total cost of $25 and a marginal cost
How do I calculate the following microeconomics problem?
A firm is producing 20 units with an average total cost of $25 and a marginal cost of $15. It increases production to 21 units, which of the following must occur?
- Marginal cost will decrease
- Marginal cost will increase
- Average total cost will decrease
- Average total cost will increase
Marginal cost = change in total cost / change in quantity
Average total cost = total cost / quantity
Marginal Cost = $15
Quantity = 20
Average total cost = $25
Total Cost = Average total cost X quantity = ($25x20) = $500
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