Question

The correct answer doesn't interest me as much as understanding how to work out the problem. In fact, according to other resources, the answers are D & B (in that order). I'm struggling to understand how to apply principles from microeconomics to work out the problem for myself. Any help would be much appreciated.

-In order to produce 100 pairs of oven gloves, Marcia incurs an average total cost of $2.50 per pair. Marcia’s marginal cost is constant at $10.00 for every pair of oven gloves produced. The total cost to produce 50 pairs of oven gloves is

A. $250.00

B. $500.00

C. $300.00

D. $200.00

-In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company’s marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is

A. $25

B. $20

C. $50

D. $60

Answer 1

Ans:

1) Option D

The total cost to produce 50 pairs of oven gloves = $200

Explanation

calculation of fixed cost

Fixed cost = Total cost - variable cost

= (average total cost * 100) - (marginal cost * 100)

= ($2.5 * 100) - ($1 * 100)

= $250 - $100

= $150

Total cost to produce 50 pairs of oven gloves = fixed cost + variable cost

= $150 + (50 * $1)

= $150 + $50

= $200

2) Option B

The total cost to produce 50 oatmeal cookies = $20

Explanation

calculation of fixed cost

Fixed cost = Total cost - variable cost

= (average total cost * 100) - (marginal cost * 100)

= ($0.25 * 100) - ($0.10 * 100)

= $25 - $10

= $15

Total cost to produce 50 oatmeal cookies = fixed cost + variable cost

= $15 + (50 * $0.10)

= $15 + $5

= $20