Question

Siri has decided to earn some money to pay for her tuition by painting houses for Amherst residents. She determines that cost of painting is roughly $80 per house. One neighbor is willing to pay her $115 to pain. A second neighbor is willing to pay $105. A third neighbor is willing to pay $101, while a fourth neighbor is willing to pay $70. What’s the marginal cost of painting? How many houses should she paint? How much much will she earn?

Answer 1

Suppose that there is a person- Person S. she started painting houses in order to pay for her tuitions. The cost of painting is $80 per house. There are four neighbours-first is willing to pay $115 for the paint, second is willing to pay $105, third is willing to pay $101 and fourth is willing to pay $70 1. Marginal cost is defined as the cost added with one additional unit of output Here, since she is taking the $80 for each house she paints, the marginal cost for each additional unit of house is $80 2. She will paint the houses of first three neighbours because they are willing to pay more than the cost of the painting the house. Thus, she should paint 3 houses considering the marginal cost and marginal benefits. 3. Find the profits in painting these three houses. Profits Total revenue - total cost Profits (115- 80) + (105 - 80) (101 - 80) = 35 2521 = $81 Thus, she earns $81 in the painting.