Using Marginal Analysis, Explain Why Many Restaurants and Coffee Shops

question 114

Essay

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).

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Definitions:

Book Depreciation

The systematic allocation of the cost of a tangible asset over its useful life for accounting and tax purposes.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on income or profits.

Income Tax Expense

The charge against earnings resulting from the tax owed by an entity on its taxable income, reflecting the cost of income taxes.

Pre-Tax Book Income

Pre-Tax Book Income is the income earned by a business before tax, as reported in its financial statements, not considering taxable income adjustments.