Question

Based on the marginal principle, would it make sense to for a business to expand their hours of operation if they project $1,500 of additional revenue per week, however they also project increase expenses of $1,000 for salaries, $150 for utilities and $50 for misc. expenses. No, because they will lose $300 per week Yes, because they will net $300 per week Yes, because they will gain $1,500 of revenue per week No, because they will incur $1,200 of expenses per week.

Answer 1

Yes, because they will net $300 per week

Step-by-step explanation:

According to the marginal principle, production can be increased if marginal revenue would exceed marginal cost. It means that the venture would be profitable

Marginal cost is the increase in cost as a result of increasing output by one unit.

total marginal cost = 1000 + 50 + 150 = 1200

Marginal revenue is the increase in revenue as a result of increasing output by one unit.

Marginal revenue exceeds marginal cost by (1500 - 1200) 300. Thus, hours of operation can be increased