Theo sells baby rattles at $3 per unit and each month he sells 3,000 units out of the back of his wagon in the city park. Theo has no employees and estimates he could rent his wagon to another entrepreneur for $2,000 eachmonth. He also knows that he could earn about $5,000 a month as a model. He pays $1 per unit for plastic, his only raw material. Question: Should Theo continue to sell his baby rattles in the park? Explain

Theo sells baby rattles at $3 per unit and each month he sells 3,000 units out of the back of his wagon in the city park. Theo has no employees and estimates he could rent his wagon to another entrepreneur for $2,000 eachmonth. He also knows that he could earn about $5,000 a month as a model. He pays $1 per unit for plastic, his only raw material. Question: Should Theo continue to sell his baby rattles in the park? Explain

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 3.3IP

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Jordan is calculating the worth of a computer by comparing its costs and benefits, including quality, relative to similar laptops. In Jordan’s view, it is often worth it to spend a little more to obtain a product with higher performance. What is Jordan calculating?
The following accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase. CPU Total Marginal Total Marginal GHz Benefit Benefit Cost Costs 2.0 $1,000 $900 2.5 $1,400 $100 $1,200 $1,500 3.0 $300 3.5 $1,900 4.0 $2,000 $400 The total benefit of a 3.0GHZ computer is:
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