Question

Let's have a little fun with this one. Please keep it clean, no profanity.

1. Copy and paste the following paragraph and add your choice of (adjective) (noun) (verb ending with ing) (plural noun) (verb) (famous person’s name, etc).

2. Write two or three additional sentences for this exercise, describing the profit-maximizing rule to Mr. Plow. (Hint: Use the concept of marginal thinking!)

Mr. Plow was fired from his last (adjective) job. He didn’t mind because his boss was such a (noun). He had always wanted to own his own business (verb ending with ing) (plural noun). However, he decided that plowing driveways was probably more profitable. He decided to (verb) a business plan with the help of his friend (famous person’s name). Mr. Plow wants to charge $10 for each driveway. This is (number) times as much as his marginal revenue would be from (verb ending with ing) (plural noun). Mr. Plow believes that in order to maximize profit, he should simply clear as many driveways as possible. Luckily, (famous person’s name) reminds him that there is a (adverb) way to determine the profit maximizing number of driveways to clear. (add your 2-3 sentences describing profit-maximizing rule.

Answer 1

Mr. Plow was fired from his last official job. He didn’t mind because his boss was such a moron. He had always wanted to own his own business selling burgers. However, he decided that plowing driveways was probably more profitable. He decided to make a business plan with the help of his friend Bill Gates. Mr. Plow wants to charge $10 for each driveway. This is 5 times as much as his marginal revenue would be from selling burgers. Mr. Plow believes that in order to maximize profit, he should simply clear as many driveways as possible. Luckily, Bill Gates reminds him that there is a better way to determine the profit maximizing number of driveways to clear.

Bill explained that profit of a business is maximized at the point where its Marginal cost equals Marginal Revenue or MC = MR. This is also known as marginal thinking for making decisions.

At the same time one should not fall in the trap of marginal thinking by avoiding costs for investing in the future (with short term pain or cash burn) or incurring small additional costs in the short term which could pile up un-backed by a business vision.