Week 2 Assignment.docx - Week 2 Assignment Chapter 4 o Problem 4-2 a According to Froeb(2016"Marginal cost is the additional cost incurred by producing

# Week 2 Assignment.docx - Week 2 Assignment Chapter 4 o...

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Week 2 Assignment Chapter 4 o Problem 4-2 a) According to Froeb, (2016), "Marginal cost is the additional cost incurred by producing and selling one more unit." (p. 41). To calculate the marginal cost based on the problem, we need the difference(change) in costs divided by the difference in change of customers. Based on the table below, the marginal cost of loading for a second customer is \$2. Customers Total Cost Marginal Cost Total Revenue Marginal Revenue Profit 1 \$30 0 \$10 0 10 - 30 = -\$20 2 \$32 (32-30)/(2-1) = 2 \$20 (20-10)/(2-1) = \$10 20 - 32 = -\$12 3 \$35 (35-32)/(3-2) = 3 \$30 (30-20)/(3-2) = \$10 30 - 35 = -\$5 4 \$38 (38-35)/(4-3) = 3 \$40 (40-30)/(4-3) = \$10 40 - 38 = -\$2 5 \$42 (42-38)/(5-4) = 4 \$50 (50-40)/(5-4) = \$10 50 - 42 = \$8 6 \$48 (48-42)/(6-5) = 6 \$60 (60-50)/(6-5) = \$10 60 - 48 = \$12 7 \$57 (57-48)/(7-6) = 9 \$70 (70-60)/(7-6) = \$10 70 - 57 = -\$13 8 \$68 (68-57)/(8-7) = 11 \$80 (80-70)/(8-7) = \$10 68 - 80 = -\$12 b) Price is equal to marginal revenue in a perfectly competitive market. If the price of service is \$10 per ride, you choose the customer load where the marginal cost equals to the price or marginal cost closest to price but less than the price. You will not prefer to provide service if marginal cost is greater than the price since additional customers cost more than it brings in. Products are maximized if seven customers are provided o Problem 4-6

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