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The existence of external benefit and external cost leads to misallocation of resources. External cost For example, when drivers are not liable for the health damage of car exhaust, drivers will equate only marginal private cost with marginal benefit. But if drivers are forced to pay for the health damage of car exhaust, their marginal cost will go up by the amount of the external cost.
The average variable cost (AVC) = 53Q/Q=53. c. The marginal cost = change in total cost / change in quantity of output. The total cost increases by 53 if the firm increases output by one unit. Thus the marginal cost is 53. d. C=45Q+240: The new fixed cost is 190+50=240, and the marginal cost is 45.