(Table: Oil Pumps) Refer to the table. Suppose that this marketis producing six barrels of oil from Oil Pump One and twobarrels of oil from Oil Pump Two. What happens to the totalcosts of production if we produce one less barrel of oil from OilPump One and one more barrel of oil from Oil Pump Two?
A)The total costs of production fall by $16.00.(True Answer )Correct
B)The total costs of production rise by $7.00.
C)The total costs of production fall by $30.
D)The total costs of production rise by $14.

Question

(Table: Oil Pumps) Refer to the table. Suppose that this marketis producing six barrels of oil from Oil Pump One and twobarrels of oil from Oil Pump Two. What happens to the totalcosts of production if we produce one less barrel of oil from OilPump One and one more barrel of oil from Oil Pump Two?
A)The total costs of production fall by $16.00.(True Answer )Correct 
B)The total costs of production rise by $7.00. 
C)The total costs of production fall by $30. 
D)The total costs of production rise by $14.

Quizplus · Accepted Answer

According to the table, the marginal cost of producing one barrel of oil from Pump One is $8.00 and the marginal cost of producing one barrel of oil from Pump Two is $4.00. Therefore, producing one less barrel of oil from Pump One saves $8.00 in costs, while producing one more barrel of oil from Pump Two incurs an additional cost of only $4.00. The net effect is a reduction in total costs of $4.00 ($8.00 saved from Pump One minus $4.00 incurred from Pump Two), which is reflected in choice A.

(Table: Oil Pumps) Refer to the Table