Asked by cristina floyd on Sep 23, 2024
Verified
Cruise liners offer last minute deals because
A) The marginal cost is higher than the marginal revenue since fixed costs are sunk
B) The marginal costs of an additional passenger are very low at that point and companies gain by lowering prices
C) The average cost of an additional passenger is very low at that point and companies gain by lowering prices
D) All of the above
Marginal Cost
The additional cost incurred by producing one more unit of a product or service, crucial for economic and pricing decisions.
Marginal Revenue
The additional income received from selling one more unit of a product or service.
Fixed Costs
Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.
- Examine the effects of various pricing strategies on the generation of revenue, with a focus on the significance of marginal revenue.
- Analyze real-world business situations to make educated choices about production volumes and pricing approaches.
Verified Answer
DB
Dcarri Britt3 days ago
Final Answer :
B
Explanation :
Cruise liners offer last minute deals because at that point, the marginal costs of an additional passenger are very low. Therefore, companies can gain by lowering prices without incurring a significant increase in costs. Fixed costs, such as fuel and maintenance, are already sunk and do not change with the number of passengers, so they do not influence the decision to lower prices at the last minute. The average cost of an additional passenger may or may not be low, depending on various factors, so option C is not accurate. Option A is incorrect because the marginal cost is not higher than the marginal revenue at the last minute, it is actually lower.
Learning Objectives
- Examine the effects of various pricing strategies on the generation of revenue, with a focus on the significance of marginal revenue.
- Analyze real-world business situations to make educated choices about production volumes and pricing approaches.