Consider a small firm that is producing winter jackets.It can lease an additional sewing machine for one month for $1200.With this additional machine,the firm can produce an additional 7 jackets during that time period that it sells for $250 each.Hiring the marginal machine adds to the firm's profit and so it should _ the machine.
A)$1200; lease
B)$1750; lease
C)$550; lease
D)- $1200; not lease
E)$0; be indifferent as to whether to lease

Question

Quizplus · Accepted Answer

The additional revenue from selling 7 jackets is $1750 (7 jackets x $250 each). The cost of leasing the machine is $1200. The profit from leasing the machine is $550 ($1750 - $1200), so the firm should lease the machine.

Consider a Small Firm That Is Producing Winter Jackets