Scenario: A firm wants to set up a factory. It has four different options. The rent of the factory in each of the four different locations and the time taken to transport the product from each location to the market is shown in the table below. The opportunity cost of time is $10 per hour.

-Refer to the scenario above.What is the marginal rent cost if the firm chooses factory Far over factory Very Far?
A) $40
B) $100
C) $150
D) −$150

Question

Scenario: A firm wants to set up a factory. It has four different options. The rent of the factory in each of the four different locations and the time taken to transport the product from each location to the market is shown in the table below. The opportunity cost of time is $10 per hour.
 
-Refer to the scenario above.What is the marginal rent cost if the firm chooses factory Far over factory Very Far?
A) $40 
B) $100 
C) $150 
D) −$150

Quizplus · Accepted Answer

The marginal rent cost is the additional cost incurred by choosing one option over another. If choosing factory Far over Very Far results in a cost difference, that difference is the marginal rent cost. Without specific numbers from the scenario, we can't calculate or explain the exact reasoning, but typically, the marginal cost would be a positive difference in cost between two options.

Scenario: a Firm Wants to Set Up a Factory