Sig Hansen runs a ski resort in British Columbia. He is considering replacing the ski lifts at the resort. His calculations suggest that if he does, the economic benefits from the upgraded ski-lift operations will total $959,000 over the next six years. The ski lifts he already has are projected to generate $444,000 in economic benefits over the next six years. The new ski lifts would require an initial cash investment of $385,000 and Sig estimates he can sell his existing ski lift equipment for$170,000. Based on these estimates, what is Sig's marginal cost from replacing the ski lifts?
A) $385,000
B) $515,000
C) $574,000
D) $215,000

Question

Quizplus · Accepted Answer

The marginal cost is the additional cost incurred from replacing the ski lifts. It is calculated as the initial investment for the new ski lifts ($385,000) minus the sale of the existing equipment ($170,000), which equals $215,000.

Sig Hansen Runs a Ski Resort in British Columbia