You sell hot dogs at a baseball game for $3.25 each. You have 100 hot dogs to sell at an average cost to you of $2.00 each. The marginal cost at q=100 is $1.95. Assume you can always sell out of hot dogs. Will increasing the number of hotdogs you have to sell increase or decrease your profit?

Question

Quizplus · Accepted Answer

Each additional hot dog sold adds $3.25 to revenue, but only costs an additional $1.95 in marginal cost. This means that each hot dog sold above the first 100 yields a profit of $1.30 ($3.25 - $1.95). Therefore, increasing the number of hot dogs to sell will increase profit.

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