Question

You run a game-day shuttle service for parking services for the local ball club. Suppose you are compensated $16 per customer, per ride. In other words, your marginal revenue is $16. Your costs for different customer loads are summarized in the following table. For each customer load, calculate both the marginal cost and the average cost. Then answer the question that follows. Note: Round your answers to the nearest cent. Customers Total Cost Marginal Cost Average Cost ($) ($ per customer) ($ per customer) 1 $30 $ $ 2 $34 $ $ 3 $42 $ $ 4 $54 $ $ 5 $70 $ $ 6 $90 $ $ 7 $114 $ $ 8 $142 $ In order to maximize profits, you should carry customers per load.

Answer 1

Answer: You should carry 6 customers per load!

Step-by-step explanation:

In order to maximize profits, you should carry 6 customers per load. This is because the marginal cost for a load of 6 customers is $90, which is the lowest marginal cost of any load size. The average cost per customer for a load of 6 customers is $15, which is lower than the average cost for any other load size. Therefore, carrying 6 customers per load will allow you to make the most profit since the average cost is lower than the marginal revenue of $16.