The Admissions Director (AD) wants to determine the optimum number of students for each ECO561 class. You are provided with the following data:
Tuition is $1250 per student.
Instructor Pay $2500
Other incidental (variable) costs - $1000.00
Variable cost increases by 10% per each additional student
How many students will you recommend to the AD?
What would be the profit for the given number of students?
Is this a profit maximizing number of students?
Now assume that variable cost increases by 15% for each additional student, what is the new profit maximizing number of students?
What is the relevance of the marginal rule (MR = MC) in your decision making?
1 answer