Economics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 1

A delivery company is considering adding another vehicle to its deliver fleet, all the vehicles of which are rented for S100 per day. Assume that the additional vehicle would be capable of delivering 1500 packages per day and that each package that is delivered brings in ten cents ($.10) in revenue. Also assume that adding the delivery vehicle would not affect any other costs. L02
a. What is the MRP? What is the MRC? Should the firm add this delivery vehicle?
b. Now suppose that the cost of renting a vehicle doubles to $200 per day. What are the MRP and MRC? Should the firm add a delivery vehicle under these circum stances?
c. Next suppose that the cost of renting a vehicle falls back down to $100 per day but, due to extremely congested freeways, an additional vehicle would only be able to deliver 750 packages per day. What are the MRP and MRC in this situation? Would adding a vehicle under these cir­cumstances increase the firm's profits?