Question

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to paya. $40 or more, as the average benefit will exceed the marginal costb. $40 or more, as the marginal benefit will exceed the marginal costc. $80 or more, as the average benefit will exceed the marginal costd. $80 or more, as the marginal benefit will exceed the marginal cost

Answer 1

Answer:

The correct answer is option b.

Explanation:

The cost of operating a 75 room hotel for a night is $6,000.

There are 5 empty rooms for tonight.

The marginal cost of operating one room for one night is $40.

The manager will have profits from renting the rooms if the rent is able to at least cover the marginal cost of renting. This is because at this point the marginal cost will be equal to marginal benefit.

So it will be profitable to rent out the room if the customer is willing to pay $40 or more because then the marginal benefit will be either equal to or greater than marginal cost.