An auto mechanic shop that provides oil changes has determined that it faces the

Question

An auto mechanic shop that provides oil changes has determined that it faces the daily revenue and cost data shown in the following table Complete the following table by determining the marginal revenue (MR) and marginal cost (MC) associated with changes in output from 0 to 15, 15 to 30, and 30 to 45 oil changes per day, and enter your answers in the appropriate column Hint: Remember that marginal revenue (MR) is defined as the change in total revenue divided by the change in output. Marginal Revenue (Dollars per oil change, $) (Dollars per day,) (Dollars per oil change, $) Total Cost Output (Oil changes per day) (Dollars per day, Total Revenue Marginal Cost 0 15 30 45 01 450 750 900 50 3) 425 875

Explanation / Answer

c. You should perform more oil changes per day, because the marginal revenue from performing an additional oil change is larger than the marginal cost.

Marginal revenue is the change in total revenue divided by change in output.

Marginal cost is the change in total cost divided by change in output.

The optimal output is the point where MR = MC. This is at output near 30. So, more oil changes should be performed to increase profit.

Q TR MR=dTR/dQ TC MC=dTC/dQ 0 0 50 15 450 30 200 10 30 750 20 425 15 45 900 10 875 30

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