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AP® Macroeconomics

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Moderate

Marginal Cost: Firm Producing Hamburgers

APMACR-LAENOZ

Suppose the following data for a firm producing hamburgers:

  • The firm can produce 1 million burgers for a total revenue of 1 million dollars and total input costs of 700,000 dollars.
  • The same firm can produce 2 million burgers for a total revenue of 1.5 million dollars with total input costs of 1 million dollars.

Which of the following statements are true given the data above?

I. Profit per burger is greater at 2 million burgers of production than at 1 million burgers of production.

II. To produce at 2 million burgers instead of 1 million burgers of production the firm incurs marginal costs of 300,000 dollars.

III. When producing at 2 million burgers instead of 1 million burgers the marginal output is 1 million burgers.

A

I only

B

II only

C

III only

D

II and III only

E

I, II and III