Question

William installs custom sound systems in cars. If he installs seven systems per day, his total costs are $300. If he installs eight systems per day, his total costs are $400. William will install eight sound systems per day only if the eighth customer is willing to pay at least:_________.A. $400. B. $300 C. $50. D. $100.

Answer 1

Answer:

D. $100

Explanation:

Given: William install 7 system per day at the cost of $300.

           William install 8 system per day at the total cost of $400.

Remember, If the marginal cost curve is upward-sloping, this means that as output increase, marginal costs will also increase.

Marginal cost is an additional cost incurred in producing additional unit of output.

Now, finding additional payment that eighth customer has to pay.

Change in marginal cost= $Cost\ incurred\ in\ installing\ 8\ system - cost\ incurred\ in\ installing\ 7\ system$

⇒ Change in marginal cost=  $\ 400-\ 300$

∴  Change in marginal cost= $\ 100$

Hence, there is an increase in marginal cost by $100 as output increases, therefore, William will install eight sound systems per day only if the eighth customer is willing to pay at least $100.