A construction company has built 25 houses so far this year at a total cost to the company of $7.2 million.If the company builds a 26ᵗʰ house,its total cost will increase to $7.5 million.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Option A is correct as the average cost per house for the 25 houses built is $7.2 million/25 = $288,000.
Option B is incorrect because the marginal cost of the 26th house is $7.5 million - $7.2 million = $300,000, which is greater than the average cost per house.
Option C is incorrect because the marginal benefit of $288,000 is equal to the average cost per house, and thus, it would not be profitable to build the 26th house as the marginal cost is higher than the marginal benefit.

A Construction Company Has Built 25 Houses So Far This