Robin owns a horse stables and riding academy and gives riding lessons for child

Question

Robin owns a horse stables and riding academy and gives riding lessons for children at “pony camp.” Her business operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is $4,000. The marginal cost of pony camp is $200 per child. In order to maximize profits, Robin should

give riding lessons to more than 20 children per month.

give riding lessons to fewer than 20 children per month.

continue to give riding lessons to 20 children per month.

We do not have enough information to answer the question.

1)

give riding lessons to more than 20 children per month.

2)

give riding lessons to fewer than 20 children per month.

3)

continue to give riding lessons to 20 children per month.

4)

We do not have enough information to answer the question.

Explanation / Answer

Q = 20

TR = $4,000

P = TR/Q = $4,000/20 = $200

P = $200

MC = $200

Since P = MR = MC, Robin must continue giving lessons to 20 children per month

Correct option: (3)

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