## You rent a car for \$30.05. The first 160 miles are free buteach mile thereafter

You rent a car for \$30.05. The first 160 miles are free buteach mile thereafter costs 16 cents. You plan to drive it 220miles. What is the marginal cost of driving the car?The marginal cost is the initial \$30.05 you spend to rent the car.The additional payment can be forgotten because it is a sunkcostThe marginal cost is the cost of gas for all miles driven. Theinitial payment and additional payment can be forgotten becauseyouve already agreed to them.The marginal costs are 16 cents per mile for miles above 160 plusthe cost of gas. Therefore the marginal cost is \$9.60 plus the costof gas. The initial payment can be forgotten because it is a sunkcost; it is not part of marginal costs.The marginal cost is the benefit of the next best alternativeforegone by making the decision. It is whatever you could havebought with \$30.05 plus the additional \$35.20 you spend to drivethe car 220 miles at a rate of \$0.16 per mile