You are hired as a consultant for a local restaurant. It is considering whether
ID: 1137696 • Letter: Y
Question
You are hired as a consultant for a local restaurant. It is considering whether to close at 9:00 p.m., or whether to stay open an extra hour (10:00 p.m.). Based on wages and utility bills, the added cost (the marginal cost) of staying open for each additional hour is $200 a. If the additional revenue (the marginal revenue) dur- ing the last hour of operation is $250, what would you recommend? By how much will profit change based on your recommendation? b. What if the additional revenue were only $100? c. What would you need to learn about marginal revenue for you to conclude that 9:00 p.m. is the ideal closing time?Explanation / Answer
Answer : If additional revenue (MR) during last hour of operation = $250
Where MC = $200
So, I recommended that local restaurant should be opened as MR is more than MC. Here the owner has been earned a additional profit has been earned by the local restaurant.
Answer b : If additional revenue were only $100 than it should not opened the restaurant for an extra hour because they are incurred loss as MC= $200 where as MR = $100. So, it is better to shut down at 9:00 pm
Answer c : Marginal revenue means an additional revenue generated from selling an output . If we want to conclude that 9:00 pm is an ideal time than marginal revenue for an extra hour is less than $200. It means that if we open a resturant than we incurred a loss.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.