Question

Susan wishes to buy gasoline and have her car washed.She finds that if she buys 9 gallons of gasoline at $2 per gallon,the car wash costs $1.50,but if she buys 10 gallons of gasoline,the car wash is free.For Susan,the marginal cost of the tenth gallon of gasoline is:_______________.
a. 50 cents.
b. $1.
c. zero.
d. $1.50.

Answer 1

Answer:

$0.50

Explanation:

Marginal cost is the additional expense associated with consuming, selling, or producing one extra unit. For Susan, the marginal cost is the extra cost incurred by purchasing the 10th  gallon of gasoline.

To obtain the marginal cost:

The cost of 9 gallons plus cash wash

=(9 x $2) + $1.50= $19.50

cost of 10 gallons plus cash wash

=(10 x $2) cash wash is free= $ 20

The extra cost associated with the additional unit (marginal cost)

= $ 20- $ 19.50

=$0.50