Table 1-3
Ivan runs a custom jewelry shop in Sparkle City.He is debating whether he should extend his hours of operation.Ivan figures that his sales revenue will depend on the number of additional hours the jewelry shop is open as shown in the table above.He would have to hire a worker for those hours at a wage rate of $25 per hour.
-Refer to Table 1-3.Using marginal analysis,how many hours should Ivan extend his hours of operations?
A)2 hours
B)3 hours
C)4 hours
D)5 hours
E)6 hours

Question

Table 1-3
  Ivan runs a custom jewelry shop in Sparkle City.He is debating whether he should extend his hours of operation.Ivan figures that his sales revenue will depend on the number of additional hours the jewelry shop is open as shown in the table above.He would have to hire a worker for those hours at a wage rate of $25 per hour.
-Refer to Table 1-3.Using marginal analysis,how many hours should Ivan extend his hours of operations?
A)2 hours 
B)3 hours 
C)4 hours 
D)5 hours 
E)6 hours

Quizplus · Accepted Answer

To determine the optimal amount of hours to extend his shop's operations, Ivan should look at the marginal revenue and marginal cost of each additional hour. From the table, we can see that the marginal revenue decreases as the number of hours increases, while the marginal cost remains constant at $25 per hour.

Using marginal analysis, Ivan should continue to extend his shop's hours until the marginal revenue equals the marginal cost. From the table, this occurs at the 5th additional hour, where the marginal revenue is $80 and the marginal cost is $25. Therefore, extending the hours of operation by 5 hours would be the best choice for Ivan to maximize his profits.

Table 1-3 Ivan Runs a Custom Jewelry Shop in Sparkle