Carroll’s Diner decides to hire a new waitress to help out with waiting tables. The new waitress costs the diner $1700 per month. The ability for customers to be served more quickly allows the diner to make an extra $2500 than previously.

How do we know that Carroll's diner made a rational economic decision?

Voluntary exchange led to the waitress making $1700 a month.

The marginal benefit of $2500 is greater than the marginal cost of $1700 for the new waitress.

Specialization led to the diner making $2500.

None of these; Scarcity of resources does not allow for rational decisions to ever be made.

Question

04-09-2018
Business

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Carroll’s Diner decides to hire a new waitress to help out with waiting tables. The new waitress costs the diner $1700 per month. The ability for customers to be served more quickly allows the diner to make an extra $2500 than previously.

How do we know that Carroll's diner made a rational economic decision?

Voluntary exchange led to the waitress making $1700 a month.

The marginal benefit of $2500 is greater than the marginal cost of $1700 for the new waitress.

Specialization led to the diner making $2500.

None of these; Scarcity of resources does not allow for rational decisions to ever be made.

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Rupicapra Rupicapra · Answer 1 · 2018-09-14T09:08:37+02:00

Answer: The marginal benefit of $2500 is greater than the marginal cost of $1700 for the new waitress.

In economics, a rational decision is a decision where the total benefit equals or exceeds the costs associated with that decision.

In this case, Carroll's diner pays the new waitress $1700, but is able to earn $2500 by serving customers more quickly. Since the diner earns $800 (2500 -1700) more than the cost paid to the waitress, we can say that hiring an additional waitress is a rational economic decision.