How much is the marginal cost of producing additional detergents?
your company must pay $2 million each year for environmental liability insurance. It must also pay $1 million per year in rent for the building in which the factory operates. This year, after paying both costs, your marketing department comes to you with the following information: “Boss, if we simply sell the quantity of detergents currently stored in our warehouses, without producing new ones, our sales will be $9 million. But if we produce and sell additional detergents our total sales will increase to $15 million. We have estimated that it will cost the company $8 million more to hire the workers needed to produce the additional detergents.”
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The marginal cost of producing additional detergents is $8 million.
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