A different interpretation of marginal cost Suppose a large
company makes 25,000 gadgets per year in batches of x items at
a time. After analyzing setup costs to produce each batch and tak-
ing into account storage costs, it has been determined that the total
cost of producing 25,000 gadgets in batches of x items at a
time is given by
a. Determine the marginal cost and average cost functions. Graph
and interpret these functions.
b. Determine the average cost and marginal cost when .
c. The meaning of average cost and marginal cost here is differ-
ent from earlier examples and exercises. Interpret the meaning
of your answer in part (b).