Question

The builder of a new movie theater complex is trying to decide how many screens she wants. Below are her estimates of the number of patrons the complex will attract each year, depending on the number of screens available.

Number of screens	Total number of patrons
1	40,000
2	70,000
3	95,000
4	115,000
5	130,000

After paying the movie distributors and meeting all other noninterest expenses, the owner expects to net $3 per ticket sold. Construction costs are $1,000,000 per screen.

a. Make a table showing the value of marginal product for each screen from the first through the fifth.

Instructions: Enter your responses as integer values.

Number of screens	Value of marginal product
1	$
2	$
3	$
4	$
5	$

What property is illustrated by the behavior of marginal products? (Click to select)Increasing returns to capitalNegative returns to capitalDiminishing returns to capital.


Instructions: Enter all of the following responses as integer values.

b. How many screens will be built if the real interest rate is 5.5 percent?  screen(s).


c. How many screens will be built if the real interest rate is 7.5 percent?  screen(s).


d. How many screens will be built if the real interest rate is 10 percent?  screen(s).

e. If the real interest rate is 5.5 percent, what is the highest construction cost per screen that would make a five-screen complex profitable? $.

Answer 1