Use the following setup for the next question.
A firm is deciding between two different sewing machines.Technology A has fixed costs of $500 and marginal costs of $50 whereas Technology B has fixed costs of $250 and marginal costs of $100.
-What is the cost of production at the number of units where the company is indifferent between the two technologies?
A)$750
B)$850
C)$950
D)$1050

Question

​Use the following setup for the next question.
A firm is deciding between two different sewing machines.Technology A has fixed costs of $500 and marginal costs of $50 whereas Technology B has fixed costs of $250 and marginal costs of $100.
-​What is the cost of production at the number of units where the company is indifferent between the two technologies?
A)​$750
B)$850
C)$950
D)​$1050

Quizplus · Accepted Answer

At the point of indifference, the total costs of using Technology A and Technology B are equal. Let Q be the quantity produced at this point. The total cost for Technology A is $500 (fixed) + $50Q (variable), and for Technology B, it's $250 (fixed) + $100Q (variable). Setting these equal to find Q: $500 + $50Q = $250 + $100Q. Solving for Q gives Q = 5. Plugging Q back into either total cost equation, for Technology A: $500 + $50*5 = $750, which is the cost of production at the point of indifference.

​Use the Following Setup for the Next Question

Use the Following Setup for the Next Question