1. Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour.
A.Using marginal analysis, how many hours should Lydia extend her nail salon’s hours of operations?
B. What is Lydia’s marginal benefit if she decides to stay open for two hours instead of one hour?
C. What is Lydia’s marginal cost if she decides to stay open for two hours instead of one hour?
2. DeShawn’s Detailing is a service that details cars at the customers’ homes or places of work. DeShawn’s cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car’s engine, a service that adds an additional $20 to the total cost of the package.
A. What is DeShawn’s marginal benefit if he sells a basic detailing package?
B. What is the marginal cost of adding the engine detailing to the basic detailing package?
C. Should DeShawn continue to offer the engine detailing service?
Hours Open Cost Total Revenue (dollars) 1 $10 $50 2 $20 $75 3 $30 $95 4 $40 $110 5 $50 $120 6 $60 $125 Marginal Benefit$40$25$20$15$10$5 Marginal Cost Marginal Net Benefit $10$10$10$10…