Asked by Marianne Szabelski on Jun 26, 2024
Verified
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
Fixed Costs
Expenses that do not change with the level of production or sales, such as rent or salaries.
Marginal Costs
The added cost of producing one additional unit of a product or service.
Indifferent
A state of having no preference between two or more options, showing neither favor nor disfavor.
- Understand the factors shaping the selection among distinct technologies or business strategies through the lens of cost-effectiveness.
Verified Answer
HX
Ha Xuan Son (K14 HL)Jun 27, 2024
Final Answer :
A
Explanation :
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.
Learning Objectives
- Understand the factors shaping the selection among distinct technologies or business strategies through the lens of cost-effectiveness.