2.6 Isabel runs her family's small pineapple processing plant, which takes fresh pineapples and cuts them into pine- apple rings, spears, and chunks. The capital stock of the firm consists of three machines of various vintages, each of which can process the pineapples into any of the three different forms. All of the machines are in excellent condi- tion, and all machines can be running at the same time. Machine 1 Machine 2 Machine 3 Cost of Processing Maximum Total Capacity per Pineapple (Pineapples) per Day $0.10 0.25 0.50 250 400 500 a. Assume that "cost of processing" includes all labor and materials, including the owner's wages. Assume further that Isabel's family signed a long-term contract (20 years) with a service company to keep the machines in good repair for a fixed fee of $1,825 per year, or $5 per day. (1) Derive the firm's marginal cost curve. (2) Derive the firm's total cost curve. b. At a price of $0.40, how many pineapples would the company process? What would total revenues, total costs, and total profits be?

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2.6 Isabel runs her family's small pineapple processing plant,
which takes fresh pineapples and cuts them into pine-
apple rings, spears, and chunks. The capital stock of the
firm consists of three machines of various vintages, each
of which can the pineapples into any of the three
different forms. All of the machines are in excellent condi-
process
tion, and all machines can be running at the same time.
Cost of Processing
per Pineapple
Maximum Total Capacity
(Pineapples) per Day
Machine 1
$ 0.10
250
Machine 2
0.25
400
Machine 3
0.50
500
a. Assume that “cost of processing" includes all labor and
materials, including the owner's wages. Assume further
that Isabel's family signed a long-term contract (20 years)
with a service company to keep the machines in good
repair for a fixed fee of $1,825 per year, or $5 per day.
(1) Derive the firm's marginal cost curve.
(2) Derive the firm's total cost curve.
b. At a price of $0.40, how many pineapples would the
company process? What would total revenues, total costs,
and total profits be?
Transcribed Image Text:2.6 Isabel runs her family's small pineapple processing plant, which takes fresh pineapples and cuts them into pine- apple rings, spears, and chunks. The capital stock of the firm consists of three machines of various vintages, each of which can the pineapples into any of the three different forms. All of the machines are in excellent condi- process tion, and all machines can be running at the same time. Cost of Processing per Pineapple Maximum Total Capacity (Pineapples) per Day Machine 1 $ 0.10 250 Machine 2 0.25 400 Machine 3 0.50 500 a. Assume that “cost of processing" includes all labor and materials, including the owner's wages. Assume further that Isabel's family signed a long-term contract (20 years) with a service company to keep the machines in good repair for a fixed fee of $1,825 per year, or $5 per day. (1) Derive the firm's marginal cost curve. (2) Derive the firm's total cost curve. b. At a price of $0.40, how many pineapples would the company process? What would total revenues, total costs, and total profits be?
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