Paducah Slugger Company makes baseball bats out of lumber supplied to it by Acme Sporting Goods, which pays Paducah $10 for each finished bat. Paducah's only factors of production are lathe operators and a small building with a lathe. The number of bats per day it produces depends on the number of employee-hours per day, as shown in the table below. a. The wage is $15 per hour and Paducah's daily fixed cost for the lathe and building is $60. Instructions: Complete the table below. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Express marginal cost values rounded to the nearest penny (two decimal places). Q (bats per day) Number of employee-hours per day 0 0 5 1 10 2 15 4 20 7 25 11 30 35 16 22 Total revenue Total labor cost Total cost Profit ($ per day) ($ per day) ($ per day) ($ per day) Marginal cost per bat What is the profit-maximizing quantity of bats (note the values for MR and MC)? bats. b. What would Paducah's profit-maximizing level of output be if the government imposed a tax of $10 per day on the company? (Hint. Think of this tax as equivalent to a $10 increase in fixed cost.) bats c. What would Paducah's profit-maximizing level of output be if the government imposed a tax of $2 per bat instead of the $10 tax of part b? (Hint. Think of this tax as a $2 per bat increase in the firm's marginal cost.) bats d. Why do the taxes in parts b and c have such different effects?
Paducah Slugger Company makes baseball bats out of lumber supplied to it by Acme Sporting Goods, which pays Paducah $10 for each finished bat. Paducah's only factors of production are lathe operators and a small building with a lathe. The number of bats per day it produces depends on the number of employee-hours per day, as shown in the table below. a. The wage is $15 per hour and Paducah's daily fixed cost for the lathe and building is $60. Instructions: Complete the table below. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Express marginal cost values rounded to the nearest penny (two decimal places). Q (bats per day) Number of employee-hours per day 0 0 5 1 10 2 15 4 20 7 25 11 30 35 16 22 Total revenue Total labor cost Total cost Profit ($ per day) ($ per day) ($ per day) ($ per day) Marginal cost per bat What is the profit-maximizing quantity of bats (note the values for MR and MC)? bats. b. What would Paducah's profit-maximizing level of output be if the government imposed a tax of $10 per day on the company? (Hint. Think of this tax as equivalent to a $10 increase in fixed cost.) bats c. What would Paducah's profit-maximizing level of output be if the government imposed a tax of $2 per bat instead of the $10 tax of part b? (Hint. Think of this tax as a $2 per bat increase in the firm's marginal cost.) bats d. Why do the taxes in parts b and c have such different effects?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Paducah Slugger Company makes baseball bats out of lumber supplied to it by Acme Sporting Goods, which pays Paducah $10 for
each finished bat. Paducah's only factors of production are lathe operators and a small building with a lathe. The number of bats per
day it produces depends on the number of employee-hours per day, as shown in the table below.
a. The wage is $15 per hour and Paducah's daily fixed cost for the lathe and building is $60.
Instructions: Complete the table below. If you are entering any negative numbers be sure to include a negative sign (-) in front of
those numbers. Express marginal cost values rounded to the nearest penny (two decimal places).
Q (bats per
day)
Number of
employee-hours
per day
0
0
5
1
10
2
15
4
20
7
25
11
30
35
16
22
Total
revenue
Total labor
cost
Total cost
Profit
($ per day) ($ per day) ($ per day) ($ per day)
Marginal
cost
per bat
What is the profit-maximizing quantity of bats (note the values for MR and MC)?
bats.
b. What would Paducah's profit-maximizing level of output be if the government imposed a tax of $10 per day on the company?
(Hint. Think of this tax as equivalent to a $10 increase in fixed cost.)
bats
c. What would Paducah's profit-maximizing level of output be if the government imposed a tax of $2 per bat instead of the $10 tax of
part b? (Hint. Think of this tax as a $2 per bat increase in the firm's marginal cost.)
bats
d. Why do the taxes in parts b and c have such different effects?
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