1. Pookie\'s Pinball Palace restores old Pinball machines. Pookie has just spent
ID: 1164012 • Letter: 1
Question
1. Pookie's Pinball Palace restores old Pinball machines. Pookie has just spent S300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After hav spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine "as is" now for $1,000. ing a What is his marginal benefit if he sells the bi What is the marginal cost of completing the e Should he sell the machine now, or finish the machine "as is" now? task? restoration first and then sell it? Open dollars S35 60 100 105 2 Eva runs a small bakery. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of S12 per hour. Refer to the table above. Using marginal analysis, should Eva extend her determine how many hours bakery's hours of operations. What is Eva's marginal benefit if she decides to stay open for two hours instead of one hour? oWhat is Ev a's marginal cost if she decides to stay open for two hours instead of one hour? s In a market economy, who decides what goods and services will be produced?Explanation / Answer
1. The marginal benefit if the machine is sold "as now" = 1000 - 300 = $700
2)/ The marginal cost of completing the task = extra cost incurred other than the anticipated cost = $1100
3) Profit gained if the machine is sold now = 1000 - 300 =$700
Profits gained if the machine is sold later = 2000 - (1100+300) = $600
He should sell the machine now as the profits will be higher be higher by $100 in that case.
2).
a) Eva can work until 6 hours in order to maximize the revenue. This is because marginal revenue is still not zero until these many hours
b). Her marginal benefit is 25 if she decides to extend her working hours to 2 hours
c). Her marginal cost is 10. This is determined because the marginal revenue reduces by 10 units as working hours are increased from 1 to 2.
3). In a market economy, the consumers and the producers together determine what goods and services should be produced.
Hours Open Total RevenueMarginal Revenue 1 35 35 2 60 25 3 80 20 4 92 12 5 100 8 6 105 5
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