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-(Table: Droids and Moisture Output) Look at the table Droids and Moisture Output. Luke Skywalker uses droids to operate a moisture farm in a perfectly competitive market on the planet Tatooine. A barrel of moisture sells for 50 republic credits. A droid costs 675 republic credits per month to rent. How many droids should Luke rent?
A) one
B) two
C) three
D) four

Question

Use the following to answer question: 
-(Table: Droids and Moisture Output) Look at the table Droids and Moisture Output. Luke Skywalker uses droids to operate a moisture farm in a perfectly competitive market on the planet Tatooine. A barrel of moisture sells for 50 republic credits. A droid costs 675 republic credits per month to rent. How many droids should Luke rent?
A) one 
B) two 
C) three 
D) four

Quizplus · Accepted Answer

Luke should rent the number of droids where the marginal revenue (price per barrel) equals the marginal cost (cost of renting a droid). The marginal revenue is 50 credits per barrel, and the cost of renting a droid is 675 credits. Luke should rent three droids if the additional output from the third droid multiplied by the price per barrel is greater than or equal to the cost of renting the droid.

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