Question

Suppose that you help run a lemonade stand in your neighborhood on weekends. Every glass of lemonade costs $0.25 to produce, and is sold for $2.00. What is the marginal cost of the 8th glass of lemonade sold? O A) $1.75 B) $0.25 C) 14.00 D) $2.00

Answer 1

B) $ 0.25

Step-by-step explanation:

By definition, the marginal cost represents the additional cost of producing the 8th glass of lemonade , when you have the 7th glass produced ( one glass more).

Assuming that the production cost is always $0.25 and there is no reduction in cost when big quantities are produced (economy of scale) , then the marginal cost is $ 0.25.

since you obtain more profit when selling the 8th glass ( $2.00) than the cost ( marginal cost= $0.25) is economically feasible to sell the lemonade.