Owners of a parking lot are deciding whether or not to add more parking spaces to the lot.The owners should stop adding parking spaces where: A)LRMR=LRMC B)LRMRLRMC C)LRMR

Question

​Owners of a parking lot are deciding whether or not to add more parking spaces to the lot.The owners should stop adding parking spaces where:
A)​LRMR=LRMC
B)LRMR>LRMC
C)LRMR<LRMC
D)​None of the above

Quizplus · Accepted Answer

When LRMR (Marginal Revenue of the Last Parking Space) is equal to LRMC (Marginal Cost of the Last Parking Space), it means that the owners are earning exactly the same amount from the last parking space that they are spending on it. Adding more parking spaces beyond this point will result in a decrease in profit, as the cost of adding an extra parking space will be greater than the revenue it generates. Therefore, the owners should stop adding parking spaces where LRMR is equal to LRMC.

​Owners of a Parking Lot Are Deciding Whether or Not

Owners of a Parking Lot Are Deciding Whether or Not