Jill Johnson owns a pizzeria. She currently produces 10,000 pizzas per month at a total cost of $500. If she produced one more pizza her total cost rises to $500.11. What does this tell us about Jill's marginal cost of producing pizzas?

Question

Business

Paloma Marshall

5 July, 12:57

Jill Johnson owns a pizzeria. She currently produces 10,000 pizzas per month at a total cost of $500. If she produced one more pizza her total cost rises to $500.11. What does this tell us about Jill's marginal cost of producing pizzas?

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Answers (1)

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Sophie Cobb · Answer 1

Marginal cost is rising.

Explanation:

Given that,

Jill Johnson currently produces = 10,000 Pizzas per month

At a total cost = $500

Marginal cost refers to the cost of producing one more unit of a commodity to satisfy a given want.

Average total cost = $500 : 10,000

= $0.05

Here, Marginal cost of producing pizzas is as follows:

= Total cost of producing 10,001 pizzas - Total cost of producing 10,000 pizzas

= $500.11 - $500

= $0.11

Therefore, marginal cost of producing an additional pizza is $0.11 and it is rising, since average total cost is less than marginal total cost and ATC rising.