Question

Shrimp Galore, a shrimp harvesting business in the Pacific Northwest, has a 30-year loan on its shrimp harvesting boat. The annual loan payment is $25,000 and the boat has a market (salvage) value that exceeds its outstanding loan balance. Prior to the 2008 shrimp harvesting season, Shrimp Galore's accountant predicted that at expected market prices for shrimp, Shrimp Galore would have a net loss of $75,000 dollars after paying all 2008 expenses (including the annual loan payment). In this case, Shrimp Galore should ?Refer to the following table:Total cost schedule for a competitive firm: Output Total Cost0 $ 101 $ 602 $ 803 $1104 $1655 $245If market price is $60, what is the maximum profit the firm can earn?

Answer 1

Answer:

a) Sell off the boat and pay back the loan and retain the extra money rather than produce nothing and experience a loss of $25,000

b) if it produces

1. If it produces 0 than 0 - 10 = -10

2. If it produces 60 than 60 - 60 = 0

3. If it produces 120 than 120 - 80 = 40

4. If it produces 180 than 180 - 110 = 70

5. If it produces 240 than 240 - 165 = 75

6. If it produces 300 than 300 - 245 = 55

Hence the maximum profit is $75