A company produces canned drinks and sells them to supermarkets at $2 per unit. The resources the company used are the workers with daily wage of $20 and a machinewhich it rents from the machine supplier at $20 per day. The company operates in a small factory by paying a daily rent of $10. The number of canned drinks it produces depends on the number of workers it hires per day, as shown in the table below Number of WorkersFixed CostVariable CostQuantity producedTotal RevenueTotal CostTotal Profit03000030-3013020102050-3023040306070-103306065130904043080801601105053010088176130466301209318615036 (i) Compute the optimal output and the profit or loss if the landlord increases the rent of factory to $20 per day (ii) Assume that the rental of factory remains at $10 per day but the government imposes a production tax of $0.50 per canned drink. Compute the optimal output and the profit or loss for the company. Hi, may i request for a more detailed explanation to these 2 parts? Thank you in advance.

The optimal quantity of output is such a quantity of output where profit is maximized.

Answered: A company produces canned drinks and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A company produces canned drinks and sells them to supermarkets at $2 per unit. The resources the company used are the workers with daily wage of $20 and a machinewhich it rents from the machine supplier at $20 per day. The company operates in a small factory by paying a daily rent of $10. The number of canned drinks it produces depends on the number of workers it hires per day, as shown in the table below

Number of Workers	Fixed Cost	Variable Cost	Quantity produced	Total Revenue	Total Cost	Total Profit
0	30	0	0	0	30	-30
1	30	20	10	20	50	-30
2	30	40	30	60	70	-10
3	30	60	65	130	90	40
4	30	80	80	160	110	50
5	30	100	88	176	130	46
6	30	120	93	186	150	36

(i) Compute the optimal output and the profit or loss if the landlord increases the rent of factory to $20 per day

(ii) Assume that the rental of factory remains at $10 per day but the government imposes a production tax of $0.50 per canned drink. Compute the optimal output and the profit or loss for the company.

Hi, may i request for a more detailed explanation to these 2 parts? Thank you in advance.

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