When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

The marginal cost of an additional unit of output is $145

Explanation:

The computation of marginal cost of an additional unit of output is shown below:

= Change in total cost : change in production level

where,

Change in total cost = Increased cost - previous cost

= $9.4 million - $6.5 million

= $2.9 million

Thus, change in total cost is $2.9 million

And, change in production level = New production level - existing production level

= 70,000 - 50,000

=20,000

Thus, change in production level is 20,000

Now,

Apply the above values in the formula which is equals to

= $2.9 million : 20,000

= $145

Hence, the marginal cost of an additional unit of output is $145