Question

You run a game day shuttle service for parking services for the local ball club. Your costs for different customer loads are 1: $30, 2: $32, 3: $35, 4: $38, 5: $42, 6: $48, 7: $57, and 8: $68. What are your marginal costs for each customer load level? If you are compensated $10 per ride, what customer load would you want? Please show your work and how the marginal cost was solved for.

Answer 1

ANSWER:

Marginal costs are the change in the costs with the addition of each customer

Marginal cost for 2 customers = total cost of 2 customers - total cost of 1 customer = 32 - 30 = 2

Marginal cost for 3 customers = total cost of 3 customers - total cost of 2 customers = 35 - 32 = 3

similarly for the rest of the 5 customers has been calculated.

total revenue = compenstion per side * quantity = $10 * (no of customers 1,2,3,4,5,6,7,8)

profit = total revenue - total cost

QUANTITY ( NO OF CUSTOMERS)	TOTAL COST	MARGINAL COST	TOTAL REVENUE	PROFIT
1	30	-	10	-20
2	32	2	20	-12
3	35	3	30	-5
4	38	3	40	2
5	42	4	50	8
6	48	6	60	12
7	57	9	70	13
8	68	11	80	12

The customer load i will want is up to the point where the MC < MR , that is 7 customers as here mc that is 9 < mr which is 10 and when we go to 8 customers MC > MR , that is 11 > 10 and therefore i will serve upto 7 customers.