Question

You are the CEO of a vacation cruise company that provides cruise service between Seattle WA to Anchorage AK. To provide this service, you use two inputs: ships and attendants. The table below describes the combinations of inputs required to produce cruises service. Assume that a ship costs $1 million dollars and that each attendant cost $1,000. The ship can make multiple cruises (and note that currently, your company owns only one ship).

Fill in the remaining columns.

This is per cruise ATC and MC:

Ship	Attendants	Cruises	TC	TFC	TVC	ATC	MC
1	100	1	(1*1,000,000) + (100*1,000) = 1,100,000	1,000,000	(100*1,000) = 100,000
1	200	2	(2*1,000,000) + (200*1,000) = 2,200,000	1,000,000	(200*1,000) = 200,000
1	300	3	(3*1,000,000) + (300*1,000) = 3,300,000	1,000,000	(300*1,000) = 300,000

The price of the cruises is unknown so the price of the ship was also used as the price for each cruise. Would this assertion be correct?

Answer 1

Ship	Attendants	Cruises	TC	TFC	TVC	ATC	MC
1	100	1	(1*1,000,000) +	1,000,000	(100*1,000) =	1100000/1 = 1100000	1100000
			(100*1,000) =		100,000
			1,100,000
1	200	2	(2*1,000,000) +	1,000,000	(200*1,000) =	2200000/2 = 1100000	2200000-1100000= 1100000
			(200*1,000) =		200,000
			2,200,000
1	300	3	(3*1,000,000) +	1,000,000	(300*1,000) =	3300000/3= 1100000	3300000-2200000= 1100000
			(300*1,000) =		300,000
			3,300,000

ATC = Total cost/Number of cruises

MC = Increase in Total cost per increase in cruise

The use of price of ship as price of the cruise is incorrect. There would be various other variable costs such as fuel costs, onboard spendings, shore exrcusion costs, food and beverage etc which need to be computed.