2. Acimit sells beeswax in a perfectly competitive market for $55 per pound (P-$55). Acimit's fixed costs are $15 and Alex is capable of producing up to 6 pounds of beeswax each year. a. Use that information to fill in the table below (hint: use the marginal cost to calculate the variable cost and remember that marginal cost is between two units): Quantity Total Revenue Fixed Cost Variable Cost Total Cost Profit Marginal Revenue Marginal Cost 0 0 15 1 2 3 4 30 35 42 50 60 72 5 6 b. If Acimit is interested in maximizing his total revenue, how many pounds of beeswax should he produce? Explain. c. What quantity of beeswax should Acimit produce to maximize his profit? Explain. d. At the profit-maximizing level of output, how do marginal revenue and marginal cost compare? e. Suppose Acimit's fixed cost rises to $30. How should Acimit change his production of beeswax to account for this increase? Explain. f. Suppose that the beeswax workers' union bargains for higher wages, making the marginal cost of producing beeswax rise by $8 at every level (the marginal cost of the 1st unit is 30+8=$38 and the marginal cost of the 2nd unit is 35+8=$43, and so on...). How should Acimit change his product to account for this increase? Explain.
2. Acimit sells beeswax in a perfectly competitive market for $55 per pound (P-$55). Acimit's fixed costs are $15 and Alex is capable of producing up to 6 pounds of beeswax each year. a. Use that information to fill in the table below (hint: use the marginal cost to calculate the variable cost and remember that marginal cost is between two units): Quantity Total Revenue Fixed Cost Variable Cost Total Cost Profit Marginal Revenue Marginal Cost 0 0 15 1 2 3 4 30 35 42 50 60 72 5 6 b. If Acimit is interested in maximizing his total revenue, how many pounds of beeswax should he produce? Explain. c. What quantity of beeswax should Acimit produce to maximize his profit? Explain. d. At the profit-maximizing level of output, how do marginal revenue and marginal cost compare? e. Suppose Acimit's fixed cost rises to $30. How should Acimit change his production of beeswax to account for this increase? Explain. f. Suppose that the beeswax workers' union bargains for higher wages, making the marginal cost of producing beeswax rise by $8 at every level (the marginal cost of the 1st unit is 30+8=$38 and the marginal cost of the 2nd unit is 35+8=$43, and so on...). How should Acimit change his product to account for this increase? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. Acimit sells beeswax in a perfectly competitive market for $55 per pound (P-$55). Aeimit's fixed costs are
$15 and Alex is capable of producing up to 6 pounds of beeswax each year.
a. Use that information to fill in the table below (hint: use the marginal cost to calculate the variable cost and
remember that marginal cost is between two units):
Quantity
Total
Revenue
Fixed Cost
0
0
15
1
2
3
4
Variable
Cost
Total Cost
Profit
Marginal
Revenue
Marginal
Cost
30
35
42
50
60
72
5
6
b. If Acimit is interested in maximizing his total revenue, how many pounds of beeswax should he produce?
Explain.
c. What quantity of beeswax should Acimit produce to maximize his profit? Explain.
d. At the profit-maximizing level of output, how do marginal revenue and marginal cost compare?
e. Suppose Acimit's fixed cost rises to $30. How should Acimit change his production of beeswax to account
for this increase? Explain.
f. Suppose that the beeswax workers' union bargains for higher wages, making the marginal cost of producing
beeswax rise by $8 at every level (the marginal cost of the 1st unit is 30+8 = $38 and the marginal cost of the
2nd unit is 35+8-$43, and so on...). How should Acimit change his product to account for this increase?
Explain.
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Step 1: Define perfectly competitive market.
VIEWStep 2: Fill the given table
VIEWStep 3: Determine the quantity to maximize the revenue
VIEWStep 4: Determine quantity to maximize the profit.
VIEWStep 5: Determine how do marginal revenue and marginal cost compare at profit-maximizing level of output
VIEWStep 6: Determine the change in the output
VIEWStep 7: Determine the quantity when the marginal cost increases by $8
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