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You and a group of friends are planning to visit a theme park, which charges $60 for admission, $100 for a two-day pass, and $130 for a three-day pass. Your friends are interested in spending a lot of time there, but they're worried about paying a lot of money. You explain the concept of marginal cost, which helps them see that the additional day is a good value 1st attempt Part 1 (4points) See Hint The average cost per day of a three-day pass is $ per person. The marginal cost of adding the third day is S per person. Part 2 (2 points) See Hint If there are 6 people in your group, the group's marginal cost of switching from the two-day pass to the three-day pass is

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Answer:

Part 1.

  • Average cost per day of a three-day pass =  $53.33/day per person

  • Marginal cost of adding the third day = $190 - $160 = $30 per person

Part 2.

  • Group's marginal cost of switching from the two-day pass to the three-day pass = $180

Explanation:

The total cost is the admission charge ($60) plust the cost of the pass ($100 or $130).

For a two-day pass that is: $60 + $100 = $160, per person

For a three-day pass that is: $60 + $130 = $190, per person

Part 1. The average cost per day of a three-day pass per person.

The average cost is the total cost divided by the number of days.

  • Average cost = $160/3days = $53.33/day per person

The marginal cost of adding the third day per person is found by subtracting the total cost for two days from the total cost for three days:

  • Marginal cost of adding the third day = $190 - $160 = $30 per person

This says that althoud the average cost for the three days is $53.33 the cost of adding the third day is $30, which is much lower; thus, it is a good deal to buy a three-days pass, as they are interested in spending a lot of time there.

Part 2. The group's marginal cost of switching from the two-day pass to the three-day pass

Since the marginal cost of switching from the two-day pass to the three-day pass is $30 per person, the marginal cost for the 6-person group is 6 times $30:

  • 6 persons × $30/person = $180.

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