After paying the movie distributors and meeting all other noninterest expenses, the owner expects to net $2 per ticket sold. Construction costs are $1,000,000 per screen.

In other words, the only cost left to consider is the interest payments on the screens she builds (in other words, if she builds 2 screens, she only has to pay the interest payments on the $2,000,000 borrowed). Note that what matters here in terms of the decision to build a screen is the additional (marginal) cost and the additional (marginal) benefit of building an extra screen.

The marginal benefit would be the value of the additional patrons (called the value of the marginal product, or VMP). Note that VMP = $2 x (# of additional patrons). In answering the following question, it would be helpful to make a table of the marginal benefits and marginal costs of each additional screen