Answer
D. Marginal cost is 8 dollars, and average total cost is 5 dollars.
Work Step by Step
Marginal Cost: The increase in total cost from producing one new unit.
In this example the amount of units produced increased from 1,000 to 1,001 units. The price increased from 5,000 dollars to 5,008 dollars. Therefore there was a 8 dollar price increase per one unit making the marginal cost 8 dollars.
Total Cost: Fixed Costs + Variable Cost
Average Total Cost: Total Cost/quantity of units produced
As said before the total cost to produce 1,001 units is 5,008 dollars.
5,008/1,001= 5 dollars
Average total cost is 5 dollars
