Schonhardt Corporation's relevant range of activity is 2,500 units to 5,500 units. When it produces and sells 4,000 units, its a
1 answer:
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Answer:
a. $900
b. 10 starter kits
c. $6,000
d. $5,907
e. $900
Explanation:
THE CORRECT QUESTION FORMAT IS AS FOLLOWS;
Anthony's Bees is an Internet e-tailer that sells equipment to aspiring beekeepers. A complete starter kit in this competitive market sells for $900. Anthony's total costs are given by TC =, where Q is the number of starter kits he sells each month. The corresponding marginal cost of producing beehives is MC =
a. What is Anthony's marginal revenue from selling another starter kit? MRES
b. How many starter kits should Anthony sell each year in order to maximize his profits? starter kits
c. How much profit will Anthony earn at this output level? Profit=$
d. Suppose Anthony is producing the quantity indicated in part b. If he decides to produce one more starter kit, what will his new profit be? Profit = $
e. The marginal revenue of producing one more starter kit
Solution is as follows;
a. From the question, we can identify that Anthony is a price taker and not a price decider. What this means is that he sell at industry determined price. Thus, selling an additional unit will give him a revenue equal to price ,so Marginal Revenue=$900
b. For a perfectly competitive firm, there will be an increase in output as long as Price >Marginal Cost or Price=Marginal Cost to maximize profit.
Thus;
we set
Marginal Cost=Price
=900
=100
Q=10 starter kits
Hence, for Anthony to maximize his starter kits, he should sell 10 starter kits each year.
c. Total Cost(TC) ==3*
=$3000
Total Revenue(TR) =P*Q=900*10=$9000
Profit= Total Revenue(TR) - Total Cost(TC) =9000-3000=$6000
d. If Anthony produces one extra unit of output.
His new quantity becomes Q=11
Total Cost(TC)== 3 ×
=$3993
Total Revenue(TR) = P*Q= 900*11=$9900
Profit=TR-TC=9900-3993=$5907
Producing an additional unit of output will lead to a decrease in his output
e. The marginal revenue of producing an additional starter kit will be revenue at Q =11 minus revenue at Q=10
That is 9900-9000 = 900
This is same as the price of the starter kit i.e MR = P