Activity 1

Name: NESSALIE A. AMAGO Course and Year: BSBA 2 FM

Date: NOVEMBER 9, 2020 Rate: _________________

Total Total
Ave. income profit
AVE. Marginal
QTY TFC TVC TC AVC Total when when
FC Cost
Cost price is price is
P10.00 P10.50
1 50 5 55 50 5 55 5 10 -44.5
2 50 8.5 58.5 25 4.25 29.25 3.5 20 -37.5
3 50 11 61 16.67 3.66 20.33 2.5 30 -29.5
4 50 13 63 12.5 3.25 15.75 2 40 -21
5 50 15 65 10 3 13 2 50 -12.5
6 50 17.5 67.5 8.33 2.92 11.25 2.5 60 -4.5
7 50 21 71 7.14 3 10.14 3.5 70 2.5
8 50 26 76 6.25 3.25 9.5 5 80 8
9 50 33 83 5.56 3.67 9.22 7 90 11.5
10 50 42.5 92.5 5 4.25 9.25 9.5 100 12.5

Activity 2

1. Explain marginal cost by citing a practical scenario.

 John’s Tires, a public company, consistently manufactures 10,000 units of truck tires
each year, incurring production costs of P5 million. However, one year finds the market
demand for tires significantly higher, requiring the additional production of units, which
prompts management to purchase more raw materials and spare parts, as well as to hire
more manpower. This demand results in overall production costs of P7.5 million to
produce 15,000 units in that year. The marginal cost for each additional unit produced is
P500 (P2, 500,000/ 5,000).

2. How is marginal cost measured?

 Marginal cost represents the incremental costs incurred when producing additional units of a
good or service. It is calculated by taking the total change in the cost of producing more goods
and dividing that by the change in the number of goods produced.
3. What is the importance of marginal cost in economics?
 Marginal cost is an important factor in economics because the company that is looking to
maximize its profits will produce up to the point where marginal cost equals the marginal
revenue. Beyond that point, the cost of producing an additional unit will exceed the
revenue generated.

4. Give an example of diminishing return

 For example there is a small cafe that hires 2 chefs to prepare special breakfast dishes. As
time passes, 2 more chefs are hired. The work, materials, equipment, etc., thus get evenly
distributed. The hiring process continues, and the work per chef consequently gets
reduced. Also, there will be an ever-increasing conflict for raw materials like the
ingredients, cookware, etc. The work might get slowed down, and even though the
number of dishes might increase, the overall production rate could be very slow.

5. Give an example of opportunity cost.

 A business owns its building. If the company moves, the building could be rented to
someone else. The opportunity cost of staying there is the amount of rent the company
would get.