Mr.Freezee operates a fleet of ice cream trucks that drive around neighbourhoods selling ice cream.He is trying to decide whether he should buy another ice cream truck to add to his fleet.He determines that one more truck will add $750 to his revenue but that the truck will also increase his costs by $1 000.Based on marginal analysis,Mr.Freezee decides:
A) that he should not purchase the truck since the costs outweigh the benefits.
B) that he should purchase the truck since the benefits outweigh the costs.
C) that he should purchase the truck since his profits will rise by $250.
D) to purchase several trucks with the same costs and benefits.

Question

Quizplus · Accepted Answer

Marginal analysis involves comparing the marginal benefit (increase in revenue) to the marginal cost (increase in costs) of a particular decision. In this case, the marginal benefit of purchasing another truck is $750 while the marginal cost is $1,000. Since the marginal cost outweighs the marginal benefit, it would not be a financially wise decision for Mr.Freezee to purchase another truck. Therefore, choice A is the best answer.

MrFreezee Operates a Fleet of Ice Cream Trucks That Drive