Question: We have two options. Option 1 has high fixed costs but lower marginal cost and therefore higher per-unit marginal profits. Option 2 has lower fixed

We have two options.

  • Option 1 has high fixed costs but lower marginal cost and therefore higher per-unit marginal profits.
  • Option 2 has lower fixed costs but also lower marginal profits.
Option 1 Option 2

Fixed cost 1,639

Per-unit Revenue 121

Marginal cost 61

Fixed cost 1,231

Per-unit revenue 121

Marginal cost 87

Overall, Option 2 is better for small quantities but Option 1 is better with larger quantities. At what order quantity would we switch from option 2 to option 1?

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