A barber currently cuts hair for 50 clients per week and earns a profit.He is considering expanding his operation in order to serve more clients.Should he expand?
A)Yes,because cutting hair is profitable.
B)No,because he may not be able to sell more services.
C)It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.
D)It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question

Quizplus · Accepted Answer

The decision to expand should be based on the marginal cost and marginal revenue. If the cost of serving additional clients is low compared to the additional revenue he will earn, then it would be profitable to expand. However, if the cost of serving additional clients is high and the additional revenue earned is not enough to cover the cost, then it would not be profitable to expand. Therefore, the best choice is C.

A Barber Currently Cuts Hair for 50 Clients Per Week