Scenario: Assume that there are five apartments located at different distances from an individual's place of work-very close, close, far, very far, and extremely far. The individual makes his choice by studying the change in costs as he moves farther from his place of work. He has to choose between renting one of the five apartments. The movement from apartment Very Close to Close has a marginal cost of −$60, a movement from apartment Close to Far has a marginal cost of −$40, a movement from apartment Far to Very Far has a marginal cost of −$10, and a movement from apartment Very Far to Extremely Far has a marginal cost of $20.
-Refer to the scenario above.Which of the following is the optimum choice?
A) Apartment Very Close
B) Apartment Close
C) Apartment Far
D) Apartment Very Far

Question

Quizplus · Accepted Answer

The optimum choice is Apartment Very Far because the marginal cost increases (from negative to positive) only after moving from Very Far to Extremely Far, indicating that up until Very Far, the individual gains more in cost savings than the additional distance costs.

Scenario: Assume That There Are Five Apartments Located at Different