Asked by Ken Xiao Xinhua on May 20, 2024
Verified
What is the total cost,at the level of production where Pastry Paradise is indifferent between which technology is used?
A) $1750
B) $1000
C) $1500
D) $2000
Marginal Cost
The increase in cost resulting from the production of one additional unit of a product or service.
Fixed Costs
Costs that do not change with the level of output or production, such as rent, salaries, and insurance premiums.
Total Cost
The complete sum of all expenses incurred in the production of goods or services, including fixed and variable costs.
- Pinpoint the factors that determine the selection process among multiple technologies or business tactics, taking into account their associated costs.
Verified Answer
AM
Allie MoralesMay 23, 2024
Final Answer :
A
Explanation :
At the level of production where Pastry Paradise is indifferent between which technology is used, the total costs of using either technology would be the same. Let's denote the level of production as Q. For Pastry Paradise, the total cost is $1500 (fixed) + $1*Q (variable). For Sweet Tooth, the total cost is $500 (fixed) + $5*Q (variable). Setting these equal to find the indifference point: $1500 + $1*Q = $500 + $5*Q. Solving for Q gives Q = 250 units. Substituting Q back into either total cost equation, for Pastry Paradise: $1500 + $1*250 = $1750.
Learning Objectives
- Pinpoint the factors that determine the selection process among multiple technologies or business tactics, taking into account their associated costs.