Calvin is a college student who identified a campus need for transportation to and from a nearby store. He owns a van with four passenger seats and pays $50 of insurance per month. Calvin calculated his cost of transporting other students to be $2.50 per round trip, assuming he has a full van. Which statement is correct, assuming Calvin has a full van?
I. Calvin's average variable costs is $15.
II. Calvin's marginal cost is constant at $2.50.
III. Calvin's average variable cost is constant at $2.50.

Question

Quizplus · Accepted Answer

Calvin's marginal cost is constant at $2.50 because the cost of transporting one additional student is always $2.50. Calvin's average variable cost is constant at $2.50 because the total variable cost (the cost of transporting students) is always $2.50 per round trip, regardless of the number of students transported.

Calvin Is a College Student Who Identified a Campus Need