Use the following to answer questions: Table: Two Firms $$\begin{array} { c c c }
\hline \text { Item } & \boldsymbol { M C } \text { of Firm 1 } & \boldsymbol { M C } \text { of Firm 2 } \
\text { Number } & & \$ 2.50 \
\hline \text { First } & \$ 5 & 5.00 \
\text { Second } & 10 & 7.50 \
\text { Third } & 15 & 10 \
\text { Fourth } & 20 & \
\hline
\end{array}$$
-(Table: Two Firms) If Firm 1 and Firm 2 in this table are guided by the invisible hand, the total cost (ignore fixed costs) of producing a total of 3 units of output is:
A) $25.
B) $12.50.
C) $5.
D) $15.

Question

Use the following to answer questions: Table: Two Firms $$\begin{array} { c c c } 
\hline \text { Item } & \boldsymbol { M C } \text { of Firm 1 } & \boldsymbol { M C } \text { of Firm 2 } \
\text { Number } & & \$ 2.50 \
\hline \text { First } & \$ 5 & 5.00 \
\text { Second } & 10 & 7.50 \
\text { Third } & 15 & 10 \
\text { Fourth } & 20 & \
\hline
\end{array}$$
-(Table: Two Firms) If Firm 1 and Firm 2 in this table are guided by the invisible hand, the total cost (ignore fixed costs) of producing a total of 3 units of output is:
A) $25.
B) $12.50.
C) $5.
D) $15.

Quizplus · Accepted Answer

The invisible hand suggests that firms will produce where marginal cost is lowest. Firm 2 has lower marginal costs for the first and second units ($2.50 and $5.00), and Firm 1 has a lower marginal cost for the third unit ($5.00). Thus, the total cost is $2.50 + $5.00 + $5.00 = $12.50.

Use the Following to Answer Questions: Table: Two Firms -(Table: Two Firms) If Firm 1 and Firm 2 in