Question

The following data are for a series of increasingly extensive flood control projects:
Total cost Total benefit per year per year
Plan A levees $10,000 $16,000
Plan B small reservoir 24,000 36,000
Plan C medium reservoir 44,000 52,000
Plan D large reservoir 72,000 64,000
Refer to the data. For Plan D marginal costs and marginal benefits are:_______. a. $72,000 and $64,000 respectively.b. $28,000 and $12,000 respectively .c. $24,000 and $18,000 respectively.d. $16,000 and $28,000 respectively.

Answer 1

Answer:

b. $28,000 and $12,000 respectively

Explanation:

The marginal cost and marginal revenue refers to the additional cost or revenue that is generated for adding an additional unit or increasing the ouput by one unit,

In thi case, moving to Large reservoir from Medium reservoir

Marginal cost: 72,000 - 44,000 = 28,000

It cost 28,000 to move to a large reservoir

Marginal revenue :64,000 - 52,000 = 12,000

It generates additional benefit for 12,000

Answer 2

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