Santiago wants to buy some milk and a box of cereal. If he buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Santiago, the marginal cost of the third quart of milk is
A) zero.
B) 25 cents.
C) 75 cents.
D) $1.

Question

Quizplus · Accepted Answer

The marginal cost of the third quart of milk is the additional cost incurred when buying the third quart. Initially, 2 quarts of milk and cereal cost $2.75. With 3 quarts, the cost is $3.00. The marginal cost of the third quart is $3.00 - $2.75 = $0.25.

Santiago Wants to Buy Some Milk and a Box of Cereal