How to Calculate Marginal Cost with Quantity Discount

What is the marginal cost of the fourth ton per day with quantity discount?

a. $225

b. $700

c. $100

d. $175

Answer:

The correct option is c. $100.

To determine the marginal cost of the fourth ton per day, we need to calculate the difference in cost between buying three tons per day and buying four tons per day with the quantity discount.

Cost of buying three tons per day: 3 tons * $200/ton = $600 per day

Cost of buying four tons per day with quantity discount: 4 tons * $175/ton = $700 per day

The difference in cost between buying three tons and four tons per day is $700 - $600 = $100.

Therefore, the marginal cost of the fourth ton per day is $100. The correct option is c.

Quantity discounts allow businesses to save on costs when purchasing larger quantities of goods.