Question

Rhonda has hired a worker to stand on the corner and wave a sign advertising her business. It costs her $10 per hour to have this worker stand on the corner. Rhonda is trying to decide how many hours per day she should hire this worker to stand on the corner. Each customer spends an average of $3 when they visit her store. She has been tracking her daily customers as a function of the number of hours per day the worker waves the sign and has found the following information:

Hours per day	Total Customers
0	50
1	65
2	75
3	81
4	85
5	88

When Rhonda hires the worker to wave the sign for one hour per day, the marginal cost is $ ____ and the marginal benefit is $ ____ . When Rhonda hires the worker to wave the sign for two hours per day, the marginal cost of the second hour is $ ___ and the marginal benefit of the second hour is $ ___ . Enter whole numbers.

Answer 1

When Rhonda hires the worker to wave the sign for one hour per day, the marginal cost is $ 10 and the marginal benefit is $45. Note that marginal cost is the cost that Rhonda has to pay per hour to have the worker stand on the corner. Marginal benefit is (65-50)*3 = 15*3 = 45.

When Rhonda hires the worker to wave the sign for two hours per day, the marginal cost of the second hour is $ 10 and the marginal benefit of the second hour is $30.

Marginal cost = amount paid to worker = 10

Marginal benefit = (75-65)*3 = 30.