Question

The Get-There-Safe Bus company incurs an average cost of $45 for each passenger it carries on its trip from Atlanta to Chattanooga. In advance of a particular trip, four seats remain unsold. Assume the marginal cost of an additional passenger is zero. The bus company could increase its profit if it:_______
a. charged any ticket price above $0 for the four remaining seats
b. charged at least $11.25 for each of the four remaining seats
c. charged at least $45 for each of the four remaining seats
d. paid four people to occupy the four remaining seats

Answer 1

Answer:

a. charged any ticket price above $0 for the four remaining seats

Explanation:

Marginal cost refers to the extra expense incurred by a business in producing as an additional unit. For a business to be profitable, its marginal cost should be equal or greater than the marginal revenue.

The Get-There-Safe Bus company has a marginal cost of zero or an additional passenger. It means the cost associated with selling one more passenger ticket is zero.  For the bus company to be profitable, it must sell an extra ticket at a price greater than the marginal cost. Therefore, a price greater than zero will result in profit.