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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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