Table 8-3
Julie plans to start a pet-sitting service. She surveyed her neighbourhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 8-3 above shows a portion of her survey results.
-Refer to Table 8-3.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 8-3
  Julie plans to start a pet-sitting service. She surveyed her neighbourhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 8-3 above shows a portion of her survey results.
-Refer to Table 8-3.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

The number of hours purchased can be determined by adding up the quantities demanded until the total revenue equals the cost of providing the service. In this case, at a price of $7 and a constant marginal cost of $7, the total revenue will increase by $7 for each additional hour sold. Starting from the top of the table, we can see that the first 3 hours sold generate a total revenue of $21 ($7/hour x 3 hours), but adding a fourth hour would generate an additional $7 in revenue, bringing the total to $28 ($7/hour x 4 hours). Therefore, the best choice is option B, where Julie sells 4 hours of pet-sitting services for a total revenue of $28.

Table 8-3 Julie Plans to Start a Pet-Sitting Service. She