Figure 2.4
-Joe runs a business and needs to decide how many hours to stay open. Figure 2.4 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 6 hours per day. If he is following the marginal principle, what must his marginal cost be?
A) $16
B) $32
C) $48
D) $24

Question

Figure 2.4
-Joe runs a business and needs to decide how many hours to stay open. Figure 2.4 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 6 hours per day. If he is following the marginal principle, what must his marginal cost be?
A) $16 
B) $32 
C) $48 
D) $24

Quizplus · Accepted Answer

According to the marginal principle, Joe should stay open for an additional hour if the marginal benefit of that hour is greater than or equal to the marginal cost. From the graph, we can see that the marginal benefit of the 6th hour is $24. Therefore, his marginal cost must also be $24 in order for him to make the best choice of staying open for 6 hours.

Figure 2.4 -Joe Runs a Business and Needs to Decide How Many