Question

An entrepreneur knits sweaters for sale. The entrepreneur has fixed costs of $100. When he makes 10 sweaters in one month, he must spend $15 on wool. To make eleven sweaters in one month, he must spend $17 on wool. If he has no other costs, what is the marginal cost of the eleventh sweater?

Answer 1

The marginal cost of the 11th sweater is $2.

Step-by-step explanation:

Answer 2

Given:
Fixed cost = 100
Variable cost = 10 sweaters; 15
Variable cost = 11 sweaters; 17

Total cost of 10 sweaters = $100 + 15 = $115
Total cost of 11 sweaters = $100 + 17 = $117

Change in number of sweaters = 11 - 10 = 1
Change in total cost = $117 - 115 = $2

The marginal cost of the 11th sweater is $2.