Work It Out, Chapter 11, Step 4

(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)

(Speaker)
The final cost measure we are interested in calculating is marginal cost.

(Description)
The table consists of 3 columns: Quantity of Cars, TC, Marginal Cost (MC). Columns, Quantity of Cars, and, TC, are the same as in the previous tables. Cells in column Marginal Cost are blank. The following text is written above the table: Complete the table by calculating the marginal cost (MC) for each level of output.

(Speaker)
Remember that marginal cost is calculated as the change in total cost divided by the change in output. To calculate marginal cost, we start by taking the change it total cost as the firm increasing production from zero to one car. Since the table increases by one car, the denominator will always be one. For the first car, the marginal cost is 40 thousand dollars.

(Description)
A cell at the intersection of the first row and the column Marginal Cost (MC) is, dashed. A cell at the intersection of the second row and the column Marginal Cost (MC) is, equals the change in Total Cost divided by the change in Quantity equals StartFraction 540 thousand dollars minus 500 thousand dollars Over 1 minus 0 EndFraction equals 40 thousand dollars divided by 1 equals 40 thousand dollars. This cell is briefly highlighted. The following text is written above the table: Marginal cost (MC) equals the change in the Total Cost divided by the change in Quantity

(Speaker)
For the second car, we're going to take the change in total cost and divide by one. The marginal cost for producing the second car is 20 thousand dollars, or 560 thousand dollars minus 540 thousand dollars.

(Description)
A cell at the intersection of the third row and the column Marginal Cost (MC) is, equals StartFraction 560 thousand dollars minus 540 thousand dollars Over 1 EndFraction equals 20 thousand dollars. This cell is briefly highlighted.

(Speaker)
As we calculate the marginal cost for the remaining levels of output, you will notice that the marginal cost initially decreases. But as output continues to increase, eventually marginal costs will also increase.

(Description)
A cell at the intersection of the fourth row and the column Marginal Cost (MC) is, equals StartFraction 570 thousand dollars minus 560 thousand dollars Over 1 EndFraction equals 10 thousand dollars. A cell at the intersection of the fifth row and the column Marginal Cost (MC) is, equals StartFraction 590 thousand dollars minus 570 thousand dollars Over 1 EndFraction equals 20 thousand dollars. A cell at the intersection of the sixth row and the column Marginal Cost (MC) is, equals StartFraction 620 thousand dollars minus 590 thousand dollars Over 1 EndFraction equals 30 thousand dollars. A cell at the intersection of the seventh row and the column Marginal Cost (MC) is, equals StartFraction 660 thousand dollars minus 620 thousand dollars Over 1 EndFraction equals 40 thousand dollars. A cell at the intersection of the eight row and the column Marginal Cost (MC) is, equals StartFraction 720 thousand dollars minus 660 thousand dollars Over 1 EndFraction equals 60 thousand dollars. A cell at the intersection of the ninth row and the column Marginal Cost (MC) is, equals StartFraction 800 thousand dollars minus 720 thousand dollars Over 1 EndFraction equals 80 thousand dollars. A cell at the intersection of the tenth row and the column Marginal Cost (MC) is, equals StartFraction 920 thousand dollars minus 560 thousand dollars Over 1 EndFraction equals 120 thousand dollars. A cell at the intersection of the eleventh row and the column Marginal Cost (MC) is, equals StartFraction 1 million 100 thousand dollars minus 920 thousand dollars Over 1 EndFraction equals 180 thousand dollars. These cells are highlighted.