Margo and Stephanie are starting separate T-shirt companies. Both will pay the same prices for shirts and stencils, but Margo chooses a more expensive silk screening machine that is capable of producing multiple shirts at once. Stephanie chooses an inexpensivemachine that only makes one shirt at a time. Each machine can be operated by one person. What can we infer about their two operations?

Question

Quizplus · Accepted Answer

Given that Margo's machine is more expensive but capable of producing multiple shirts at once, her initial costs are spread over a larger number of shirts as production increases, leading to a lower average total cost (ATC) at higher levels of output compared to Stephanie's, which can only produce one shirt at a time.

Margo and Stephanie Are Starting Separate T-Shirt Companies