Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he increases output to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is Ernie's marginal cost per earmuff?
A) $105
B) $35
C) $9.55
D) $5

Question

Quizplus · Accepted Answer

The marginal cost is the change in total cost divided by the change in quantity. The change in total cost is $2100 - $2000 = $100, and the change in quantity is 220 - 200 = 20 earmuffs. Therefore, the marginal cost per earmuff is $100 / 20 = $5.

Ernie's Earmuffs Produces 200 Earmuffs Per Year at a Total