Table 16-1
Julie plans to start a pet-sitting service.She surveyed her neighborhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 16-1 below shows a portion of her survey results.
-Refer to Table 16-1.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7.How many hours will be purchased and what is her total revenue?

Question

Table 16-1
  Julie plans to start a pet-sitting service.She surveyed her neighborhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 16-1 below shows a portion of her survey results.
-Refer to Table 16-1.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7.How many hours will be purchased and what is her total revenue?

Quizplus · Accepted Answer

At a price of $7, Julie will be able to supply pet-sitting services up to the point where the marginal revenue equals her constant marginal cost of $7 per hour. In this case, the marginal revenue equals $7 for each of the first four hours, as shown in the table. Beyond the fourth hour, the marginal revenue falls below the $7 marginal cost, so Julie will not provide additional services. Therefore, Julie will supply four hours of pet-sitting services, with a total revenue of $28 (4 hours multiplied by the $7 price).

Table 16-1 Julie Plans to Start a Pet-Sitting Service.She Surveyed