Scenario 16.4 - Santorini Donkeys

question 77

Multiple Choice

Scenario 16.4 - Santorini Donkeys
Sturdy little donkeys are used to carry corpulent tourists up the Santorini caldera to the town of Fira. One cruise line that routinely docks at the port is considering a plan to maintain their own donkey herd, which will cost them $15,000 per thousand tourists. The number of tourists needing this service is normally distributed, with a mean of Usually, this is enough donkey capacity, but occasionally the cruise line rotates a bigger ship through this route and the excursion director must purchase donkey capacity on the spot market, where is costs $20 per tourist.
-Once a local donkey herder learns of the cruise line's plan, he lowers his donkey rental price to $17.50 per tourist. How many donkeys should be in the cruise line's herd?

• A) 7,264
• B) 7,005
• C) 6,711
• D) 6,370

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Definitions:

Marginal Utility

The added value or satisfaction experienced upon consuming an additional unit of a good or service.

Diamond-Water Paradox

A paradox highlighting the discrepancy between the high value of non-essential items, like diamonds, and the low value of essential items, like water, despite their utility.

Marginal Utility

The enhancement in satisfaction or benefit a consumer achieves by consuming an additional unit of a good or service.