Question

Beta Moure Open 1 Total Rure (dollars) 2 3 95 4 110 120 125 Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Her sales revenue will depend on the number of extra hours the nail salon is open as shown in the table above. She would have to hire a worker for those extra hours at a wage rate of $10 per hour. Using marginal analysis, by how many hours should Lydia extend her nail salon's hours of operations? Select one: 3 hours 2 hours 5 hours 4 hours

Answer 1

---> answer is a) 3 hours......

----> Marginal analysis involves examination of the associated costs and potential benefits of specific business activities. It tells us whether the costs associated with the change in activity will result in a benefit that is sufficient enough to offset them.

--->In the above example, if Lydia opens her saloon 2 hours more , she will get revenue of about 75-20= $55. If she extends for 3hours,she will get revenue of about 95-30= 65. If she extends for 4hours,she will get revenue of about 110-40= 70. If she extends for 5hours,she will get revenue of about 120-50= 70. If she extends for 6hours,she will get revenue of about 125-60= 65. So here the more optimal operation is to extend saloon for 3hours and get a revenue of about $65 instead of working 4hrs and getting a revenue of about$70 is sub optimal.