40 of 4040 of 40 Items
Question
Franklin wants to purchase additional batting cages for his amusement park. Each batting cage costs $9,000 to set up and is expected to generate $25,000 in profit before it wears out. However, the more cages he buys, the less use they will get. He creates the following table to examine the marginal benefits of purchasing more cages. How many cages should Franklin purchase to maximize his net benefit? What is his maximum net benefit?
Unit 1 2 3 4 5 6
Marginal Benefit $25,000 $20,000 $15,000 $10,000 $5,000 $0
(1 point)
Responses
To maximize his net benefit, Franklin should purchase 3 batting cages, as that is when the marginal benefit is the highest.
His maximum net benefit would be the total profit generated by the 3 cages ($25,000 x 3 = $75,000) minus the cost of setting up 3 cages ($9,000 x 3 = $27,000), which equals $48,000.