Marginal cost is the
A. change in total cost resulting from the purchase of one more unit of the variable input.
B. change in total cost resulting from the production of one more unit of output.
C. difference between total fixed cost and total variable cost.
D. difference between total cost and total expenditure.
Answer: B
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You have been hired by a data processing firm to provide economic advice. The owner of the firm tells you that the firm's only variable input is the number of data-entry operators. The hourly wage for data-entry operators is $10.00. The marginal revenue product curve for data-entry operators reaches its maximum at three workers with a marginal revenue product of $12.00. What advice would you give this firm?
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