A12.2 Penny Shaving Club is an online retailer of men’s razors. It purchases wholesale razors and resells them to final consumers through its website.

Penny Shaving Club sells 500,000 packs of razors per year, spread evenly throughout the year. Its managers must maintain some inventory to keep their business running. The annual cost of holding a pack of razors in inventory is $6.

Penny Shaving Club can make regular orders from its wholesale provider, but it must pay a

$1.50 fixed ordering fee with each order and a price of $3 per pack of razors ordered.

a. What is the marginal benefit from increasing the order size for Penny Shaving Club?

b. What is the marginal cost of increasing the order size for Penny Shaving Club?

c. What is the profit-maximizing order size?