A firm's average total cost is ₹ 300 at 5 units of output and ₹ 320 at 6 units. The marginal cost of producing the 6th unit is:

1. First find total cost at each output using TC = ATC × Q. 2. TC₅ = 300 × 5 = ₹ 1,500 and TC₆ = 320 × 6 = ₹ 1,920. 3. MC of the 6th unit = TC₆ − TC₅ = 1920 − 1500 = ₹ 420. 4. ₹ 20 (A) is just the rise in ATC, not MC; ₹ 320 (B) is the new ATC; ₹ 120 (D) ignores that ATC must be multiplied by quantity. Hence ₹ 420. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit II "Theory of Cost", p.20–21_