-Cindy's Shirts' production function is shown in the above table. Cindy rents two sewing machines for $30 a day each and hires workers at a daily wage rate of $40 per worker. What is the marginal cost when production increases from 18 to 20 units per day?
A) $40.00
B) $10.00
C) $20.00
D) $8.00

Question

-Cindy's Shirts' production function is shown in the above table. Cindy rents two sewing machines for $30 a day each and hires workers at a daily wage rate of $40 per worker. What is the marginal cost when production increases from 18 to 20 units per day?
A) $40.00 
B) $10.00 
C) $20.00 
D) $8.00

Quizplus · Accepted Answer

The marginal cost (MC) is calculated by the change in total cost divided by the change in quantity. When production increases from 18 to 20 units, the increase in quantity is 2 units. If the only variable cost is the wage rate at $40 per worker, and assuming one worker can produce the additional units, the total cost increase is $40. Therefore, MC = $40 / 2 units = $20.00.

-Cindy's Shirts' Production Function Is Shown in the Above Table