Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he increases output to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is Ernie's marginal cost per earmuff?
A) $9.55
B) $5
C) $35
D) $105

Question

Quizplus · Accepted Answer

The marginal cost per earmuff is calculated by the change in total cost divided by the change in quantity. The total cost increased from $2000 to $2100, a change of $100, for an increase of 20 earmuffs (from 200 to 220). Thus, the marginal cost per earmuff is $100 / 20 = $5.

Ernie's Earmuffs Produces 200 Earmuffs Per Year at a Total