Jessica owns a company that makes pre-packaged sandwiches for convenience stores.The market price for a sandwich is $5 and Jessica is a price-taker.Her daily variable cost for making sandwiches is C(Q)= 2.5Q + (Q²/40)and her marginal cost is MC = 2.5 + (Q/20).What is the average cost of a sandwich at the quantity of sandwiches Jessica should be selling each day?

Question

Quizplus · Accepted Answer

To find the quantity of sandwiches that Jessica should be selling each day, we need to find the quantity where marginal cost (MC) equals market price, which is $5. 2.5 + (Q/20) = 5 Q/20 = 2.5 - 2.5 Q/20 = 2.5 Q = 2.5 x 20 Q = 50 Therefore, Jessica should be selling 50 sandwiches each day. To find the average cost of a sandwich at this quantity, we need to calculate the total cost and divide by the quantity. Total cost = 2.5(50) + (50²/40) Total cost = 125 + 1.25S Average cost = Total cost / Quantity Average cost = (125 + 1.25S) / 50 At the quantity of 50 sandwiches, the average cost is: Average cost = (125 + 1.25(50)) / 50 Average cost = $3.75 Therefore, the best choice for the average cost of a sandwich at the quantity of sandwiches Jessica should be selling each day is C) $3.75.

Jessica Owns a Company That Makes Pre-Packaged Sandwiches for Convenience