Question

Question 2 1 pts Hal and Gavin are siblings who own a mattress recycling company. Demand has been increasing for their services and the brothers are contemplating whether to open up an additional mattress drop off site in the downtown area. They estimate it would add $1 million in expenses with their profit increasing by $150 thousand each year for the next 5 years (all other things equal). Hal and Gavin decide to open a mattress drop off site downtown because the marginal cost of the new location is less than other similar projects. to not open a mattress drop off site downtown because the marginal costs prove to be too high. Oto open a mattress drop off site downtown because the expected marginal benefit is greater than the estimated marginal cost.

Answer 1

Solution:

Option B is correct i.e Hal and Gavin decide to not open a mattress drop off site downtown because marginal costs prove to be too high. They need to spend $1 million however they will earn additional $750 thousand over a period of 5 years.