Question

Suppose that the cost of operating a 100-room hotel for a night is $10,000, whether or not there are any guests are the hotel. Suppose that there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and the customer is willing to pay $60 for the night, the hotel manager should____________.a. rent the room because the marginal benefit exceeds the marginal cost.b. rent the room because the marginal benefit exceeds the average cost.c. not rent the room because the marginal benefit is less than the marginal cost.d. not rent the room because the marginal benefit is less than the average cost.

Answer 1

a. rent the room because the marginal benefit exceeds the marginal cost

Step-by-step explanation:

Suppose that the cost of operating a 100-room hotel for a night is $10,000, whether or not there are any guests are the hotel. Suppose that there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and the customer is willing to pay $60 for the night, the hotel manager should rent the room because the marginal benefit exceeds the marginal cost. Ofcourse hotel manager would always seek the benefit and in that case marginal benefit is more than the marginal cost