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 aq0 to oinge14 Isina TC = 10,000 + 40Q + 0.0025Q² and vibr to lavsi ai oi i xhOLteca nolyiutioie MC = 40 + 0.005Q/rim s drol ese noite eidT nidaki noilasimixam benistie where costs are measured in U.S. dollars and Q is the number of wine decanters pro- duced annually. Because Bavarian Crystal Works is only one of many crystal produc- ers in the world market, it can sell as many of the decanters as it wishes for $70 apiece. Total and marginal revenue are jianad tan ssim it of vtvios io bni TR = 70Q o atoibnut ad teva and MR = 70 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 opti- mal number of wine decanters? c. At the optimal level of production of decanters, an extra decanter can be sold for $70, thereby increasing total revenue by $70. Why does the manager of this firm not produce and sell one more unit?
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 aq0 to oinge14 Isina TC = 10,000 + 40Q + 0.0025Q² and vibr to lavsi ai oi i xhOLteca nolyiutioie MC = 40 + 0.005Q/rim s drol ese noite eidT nidaki noilasimixam benistie where costs are measured in U.S. dollars and Q is the number of wine decanters pro- duced annually. Because Bavarian Crystal Works is only one of many crystal produc- ers in the world market, it can sell as many of the decanters as it wishes for $70 apiece. Total and marginal revenue are jianad tan ssim it of vtvios io bni TR = 70Q o atoibnut ad teva and MR = 70 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 opti- mal number of wine decanters? c. At the optimal level of production of decanters, an extra decanter can be sold for $70, thereby increasing total revenue by $70. Why does the manager of this firm not produce and sell one more unit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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
aq0 to noiinseu14 Isind TC = 10,000 + 40Q + 0.0025Q²
and
ivibe to l9v9i ani oi
-MC = 40 + 0.005Q1oriism s Arol else noitee eaidT
aigie s
niged sW noilesimixam benistie
iton to laval orfs.ot doagee sideixav,
where costs are measured in U.S. dollars and Q is the number of wine decanters pro-
duced annually. Because Bavarian Crystal Works is only one of many crystal produc-
ers in the world market, it can sell as many of the decanters as it wishes for $70 apiece.
Total and marginal revenue are tanad tan
ait oT vtivins to briTR = 700
owd io anoilanut ed teoo
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?
and
MR = 70
%3D
b. What are the total revenue, total cost, and net benefit (profit) from selling the opti-
lansmal number of wine decanters?
c. At the optimal level of production of decanters, an extra decanter can be sold for
$70, thereby increasing total revenue by $70. Why does the manager of this firm not
produce and sell one more unit?
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