A dressmaker can sew 400 garments with 100 bolts of fabric and 1,500 hours of la

Question

A dressmaker can sew 400 garments with 100 bolts of fabric and 1,500 hours of labor. Another dressmaker can sew 400 garments with 150 bolts of fabric and 1,000 hours of identical labor. Fabric costs $110 a bolt and labor costs $20 an hour. Is it possible for both methods to be economically efficient? Why or why not?

A. No, because the second method has lower total costs of production.

B. Yes, because even though their costs differ, the higher-cost dressmaker may be able to sell the garments at a higher price.

C. No, because the first method has lower total costs of production.

D. Yes, because the dressmakers will sell the garments for the same price.

A. No, because the second method has lower total costs of production.

B. Yes, because even though their costs differ, the higher-cost dressmaker may be able to sell the garments at a higher price.

C. No, because the first method has lower total costs of production.

D. Yes, because the dressmakers will sell the garments for the same price.

Explanation / Answer

Case 1: Total Cost = Labour cost + Fabric cost

Total cost = 1500*20 + 100*110 = 41000

Case 2: TC = 1000*20 + 150*110 = 36500

Since the total cost is less in case 2, option A. is correct.

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