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26 August, 08:07

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?

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  1. 26 August, 08:13
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    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.
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