Suppose the figure below shows Luke's demand curve for check-ups along with the supply curve for check-ups. What is the marginal cost of one extra check-up?
A)$50
B)$100
C)$150
D)$200

Question

Suppose the figure below shows Luke's demand curve for check-ups along with the supply curve for check-ups.  What is the marginal cost of one extra check-up?
A)$50 
B)$100 
C)$150 
D)$200

Quizplus · Accepted Answer

The marginal cost of one extra check-up is equal to the intersection of the supply curve and the demand curve. From the graph, we can see that the intersection point is at a price of $400 and a quantity of 800 check-ups. At this point, the supply curve intersects the demand curve and represents the marginal cost of producing an extra check-up. Therefore, the marginal cost is $100 ($400 - $300).

Since we don't have any information about Luke's preferences or budget, we cannot determine the best choice for him. However, if we assume that Luke wants to maximize his consumer surplus (the difference between the highest price he is willing to pay and the market price), then he should choose to purchase 800 check-ups at a price of $400 each. This is because at this price and quantity, Luke's willingness to pay (as indicated by his demand curve) is exactly equal to the market price (as indicated by the supply curve).

Suppose the Figure Below Shows Luke's Demand Curve for Check-Ups