Using marginal analysis, explain why many restaurants and coffee shops offer low-cost refills on beverages (for example, a shop may charge $1.50 for a cup of coffee and only $.50 for a refill).
What will be an ideal response?
The cost of the beverage includes the cost of serving it and of collecting and cleaning the cup or glass (or the cost of the cup, if it is disposable). The marginal cost of the refill is just the cost of the beverage itself, since the customer uses the same cup. Thus, the marginal cost of the refill is lower, and hence the profit-maximizing firm will charge a reduced price for it.
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Other things being equal, the quantity theory of money suggests that any increase in the money supply
A) results in a decrease in the aggregate price level. B) causes the aggregate level of nominal Gross Domestic Product (GDP) to fall. C) causes a reduction in the demand for money. D) results in a proportionate increase in the price level.
Changes in government spending and/or taxes as the result of legislation, is called
What will be an ideal response?