Question

Werner 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 in. stall 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:

$100

Explanation:

Total cost if he installs seven systems = $300

Total cost if he installs eight systems = $400

Therefore, the marginal cost of installing 8th system is the difference between the total cost of installing eight systems and the total cost of installing seven systems.

Marginal cost of installing 8th system:

= Total cost of installing 8 systems - Total cost of installing 7 systems

= $400 - $300

= $100

The profit maximization conditions says that the marginal cost must be equal to the marginal revenue.

Hence,

William will install eight systems per day only if the eight customer is willing to pay at least $100.