Owen runs a delivery business and currently employs three drivers. He owns three vans that employees use to make deliveries, but he is considering hiring a fourth driver. If he hires a fourth driver, he can schedule breaks and lunch hours so that all three vans are in constant use, allowing him to increase deliveries per day from 60 to 75. It will cost an additional $75 per day to hire the fourth driver. The marginal cost per delivery of increasing output beyond 60 deliveries per day:
A) is $0 since Owen does not have to purchase another van.
B) is $5.
C) is $75.
D) cannot be calculated without knowing Owen's total fixed costs.

Question

Quizplus · Accepted Answer

The marginal cost per delivery is calculated by dividing the additional cost by the additional number of deliveries. The additional cost is $75 for the fourth driver, and the additional deliveries are 15 (75-60), so the marginal cost per delivery is $75/15 = $5.

Owen Runs a Delivery Business and Currently Employs Three Drivers