Question

You and a group of friends are planning to visit a theme park, which charges $60 for admission, $90 for a two-day pass, and $110 for a three-day pass. Your friends are interested in spending a lot of time there, but they’re worried about paying a lot of money. You explain the concept of marginal cost, which helps them see that the additional day is a good value.

The average cost per day of a three-day pass is $_______.
The marginal cost of adding the third day is $_______.
If there are 7 people in your group, the group's marginal cost of switching from the two-day pass to the three-day pass is $________.

Answer 1

The average cost per day of a three-day pass is $36.6

To find the average cost, we simply divide the cost of the three-day pass $110, by the number of days:

$110/3 = $36.6

The marginal cost of adding the third day is $20

The marginal cost is the additional cost incurred when adding the third day. We can find it by substracting the cost of the two-day pass from the cost of the three-day pass:

$110 - $90 = $20

If there are 7 people in your group, the group's marginal cost of switching from the two-day pass to the three-day pass is $140

If we assume that the values in the question are per person, then the answer is: $140

$110 * 7 = $770

$90 * 7 = $630

$770 - $630 = $140