Question

Your opportunity cost of cutting hair at your barbershop is $20 per hour. Electricity costs $6 per hour, and your weekly rent is $250. You normally stay open nine hours per day. What is the marginal cost of staying open for one more hour?
A) $276
B) $26
C) $250
D) $37

Answer 1

Answer:

B) $26

Explanation:

Marginal Cost Formula:

Marginal Cost = Change in total cost / Change in quantity

Marginal Cost = (2070-1888) / 10-9

Marginal Cost = 182/1

Marginal Cost = $182

Marginal Cost = 182/70 = $26/hour

Working:

9 hours a day

Number of Hours worked during week = 9x7 = 63 hours

Total Cost = ((20+6)x63)+250 = $1,888

10 hours a day

Number of Hours worked during week = 10x7 = 70 hours

Total Cost = ((20+6)x70)+250 = $2,070