Thirsty Thelma owns and operates a small lemonade stand.When Thelma is producing a small quantity of lemonade, she has few workers and her equipment is not being fully utilised.Because she can easily put her idle resources to use:
A)the marginal cost of an extra worker is large
B)the marginal product of an extra worker is small
C)the marginal cost of one more glass of lemonade is small
D)her lemonade stand is likely to be crowded with workers

Question

Quizplus · Accepted Answer

When Thelma is producing a small quantity of lemonade and her equipment is not being fully utilised, she is operating at a point of low marginal cost. This means that the cost of producing one more unit of output (in this case, one more glass of lemonade) is relatively small. Therefore, Thelma should take advantage of this situation and produce more lemonade to increase her profits. Options A and B are not relevant to this scenario and D is unlikely as Thelma mentions having few workers.

Thirsty Thelma Owns and Operates a Small Lemonade Stand