Question

Scenario​ : The average total cost to produce 100 cookies is​ $0.25 per cookie. The marginal cost is constant at​ $0.10 for all cookies produced. Refer to Scenario 1. The total cost to produce 50 cookies is:______.

A. ​$25.
B. ​$50.
C. ​$60.
D. ​$20.
E. indeterminate.

Answer 1

Answer: D. $20

Step-by-step explanation:

Total cost to produce 50 cookies = Total cost to produce 100 cookies - Marginal cost to produce 50 cookies

Total cost to produce 100 cookies is:

= Average total cost * number of cookies

= 0.25 * 100

= $25

Marginal cost to produce 50 cookies is:

= Constant marginal cost * number of cookies

= 0.10 * 5

= $5.00

Total cost to produce 50 cookies = 25 - 5

= $20.00