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12 March, 15:39

Acme Home Builders, Inc., has build 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

The marginal cost of the 25th house, if it is built, will equal $250,000

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  1. 12 March, 18:01
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    25th house's Marginal cost is $250,000.

    Explanation:

    Given:

    Total cost of 24 houses = $4,800,000

    Total cost of 25 houses = $5,050,000

    Marginal cost = ?

    Computation of marginal cost:

    Marginal cost = Change in total cost

    Marginal cost = Total cost of 25 houses - Total cost of 24 houses

    Marginal cost = $5,050,000 - $4,800,000

    Marginal cost = $250,000

    So, we say that 25th house's marginal cost will be $250,000.
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