Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $30, the second by $ 27, the third by $24, and so on, until the tenth unit increases profit by just $3. The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $9.50. Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following table, fill in the marginal revenue, total cost, and total profit for the paper mill when selling paper to the box mill at each given price. \table[[\table[[Price], [(Marginal], [Profitability to], [the Box Mill)], [(S)]]. \table[[Quantity], [(Units of Paper], [ equivalent to], [One Box)]], \table[[Total], [Revenue]], Marginal revenue, Total Cost,\table[[Marginal], [Cost], [(S)]], Profit], [$ 30, 1, $30,, $9.50,,], [$27, 2, $54,...]. [$24, 3, $72,...]. [$21,4, $84,...]. [$18,5, $90,...]] (Marginal If the paper mill sets the price of paper to sell to the box mill, it will set a price of for the paper mill. Companywide profits will be and sell units of paper to the box mill. Profits will be marginal profitability of each unit of paper, or box, to the box mill.) (Hint: Recall that the prices in the table represent the Suppose the paper mill is forced to transfer paper to the box mill at marginal cost ($ 9.50).
Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $30, the second by $ 27, the third by $24, and so on, until the tenth unit increases profit by just $3. The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $9.50. Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following table, fill in the marginal revenue, total cost, and total profit for the paper mill when selling paper to the box mill at each given price. \table[[\table[[Price], [(Marginal], [Profitability to], [the Box Mill)], [(S)]]. \table[[Quantity], [(Units of Paper], [ equivalent to], [One Box)]], \table[[Total], [Revenue]], Marginal revenue, Total Cost,\table[[Marginal], [Cost], [(S)]], Profit], [$ 30, 1, $30,, $9.50,,], [$27, 2, $54,...]. [$24, 3, $72,...]. [$21,4, $84,...]. [$18,5, $90,...]] (Marginal If the paper mill sets the price of paper to sell to the box mill, it will set a price of for the paper mill. Companywide profits will be and sell units of paper to the box mill. Profits will be marginal profitability of each unit of paper, or box, to the box mill.) (Hint: Recall that the prices in the table represent the Suppose the paper mill is forced to transfer paper to the box mill at marginal cost ($ 9.50).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of
producing boxes declines with volume. For example, the first unit of boxes increases earnings by $30, the second by $
27, the third by $24, and so on, until the tenth unit increases profit by just $3. The cost the upstream mill incurs for
producing enough paper (one "unit" of paper) to make one unit of boxes is $9.50. Assume the two mills operate as
separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes
represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore,
assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and
marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following
table, fill in the marginal revenue, total cost, and total profit for the paper mill when selling paper to the box mill at each
given price. \table[[\table [[Price], [(Marginal], [Profitability to], [the Box Mill)], [($)]], \table[[Quantity], [(Units of Paper], [
equivalent to], [One Box)]], \table[[Total], [Revenue]], Marginal revenue, Total Cost,\table[[Marginal], [Cost], [(S)]], Profit], [$
30, 1, $30,, $9.50,,], [$27,2,$54,...]. [$24, 3, $72,...]. [$21, 4, $84,...]. [$18,5, $90,...]] (Marginal If the paper mill sets the
price of paper to sell to the box mill, it will set a price of for the paper mill. Companywide profits will be and sell units of
paper to the box mill. Profits will be marginal profitability of each unit of paper, or box, to the box mill.) (Hint: Recall that
the prices in the table represent the Suppose the paper mill is forced to transfer paper to the box mill at marginal cost ($
9.50).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbccf756d-1623-4db2-b7fa-b44356a0f548%2Fc2419e53-5c2d-4d88-a0a4-da330ee0f5b2%2F9y9fgyc_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of
producing boxes declines with volume. For example, the first unit of boxes increases earnings by $30, the second by $
27, the third by $24, and so on, until the tenth unit increases profit by just $3. The cost the upstream mill incurs for
producing enough paper (one "unit" of paper) to make one unit of boxes is $9.50. Assume the two mills operate as
separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes
represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore,
assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and
marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following
table, fill in the marginal revenue, total cost, and total profit for the paper mill when selling paper to the box mill at each
given price. \table[[\table [[Price], [(Marginal], [Profitability to], [the Box Mill)], [($)]], \table[[Quantity], [(Units of Paper], [
equivalent to], [One Box)]], \table[[Total], [Revenue]], Marginal revenue, Total Cost,\table[[Marginal], [Cost], [(S)]], Profit], [$
30, 1, $30,, $9.50,,], [$27,2,$54,...]. [$24, 3, $72,...]. [$21, 4, $84,...]. [$18,5, $90,...]] (Marginal If the paper mill sets the
price of paper to sell to the box mill, it will set a price of for the paper mill. Companywide profits will be and sell units of
paper to the box mill. Profits will be marginal profitability of each unit of paper, or box, to the box mill.) (Hint: Recall that
the prices in the table represent the Suppose the paper mill is forced to transfer paper to the box mill at marginal cost ($
9.50).
Transcribed Image Text:(Marginal
Profitability to
the Box Mill)
(Units of Paper
equivalent to
(s)
One Box)
($)
($)
$30
($)
1
$30
$9.50
$27
2
$54
$24
3
$72
$21
$84
$18.
$90
$15
6
$90
$12
7
$84
$9
8
$72
$6
9
$3
10
$54
$30
($)
($)
$9.50
$
$
$
$9.50
$
$9.50
$9.50
$9.50
$
$9.50
$
$9.50
$9.50
$9.50
and sell
units of paper to the box mill. Profits will be
(Hint: Recall that the prices in the table represent the
If the paper mill sets the price of paper to sell to the box mill, it will set a price of
for the paper mill. Companywide profits will be
$
marginal profitability of each unit of paper, or box, to the box mill.)
Suppose the paper mill is forced to transfer paper to the box mill at márginal cost ($9.50).
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