7 Bavarian Crystal Works designs and produces lead crystal wine decanters for export to international markets. The production manager of Bavarian Crystal Works estimates total and marginal production costs to be
T C = 10, 000 + 40Q + 0.0025Q2 MC = 40 + 0.005Q
where revenues are measured in U. S. dollars and Q is annual decanter production
. a. What is the optimal level of production of wine decanters? What is the marginal revenue from the last wine decanter sold?
b. What are the total revenue, total cost, and net benefit (profit) from selling the optimal number of wine decanters?
c. Is the optimal profit in answer b good enough to keep Bavarian Crystal Works in the market? Please comment on it.
Answer:- optimal quantity is where
MR=MC
40 + 0.005Q=70
Q=6000
The correct answer is: 6000
What is the marginal revenue from the last wine decanter sold?
The correct answer is: $ 70
Answer:- it’s a perfectly competitive market so, P=MC
TOTAL REVENUE=PQ
=6000*70
TR=$420,000
The correct answer is: $420,000
Answer:- TC=10,000 + 40Q + 0.0025Q2
10,000 + 40(6000) + 0.0025(6000)2
=$340,000
The correct answer is: $340,000
Answer:- Net Benefit= Total revenue-total cost
=$420,000- $340,000
=$80,000
The correct answer is: $80,000
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