VannasBrew produces raspberry lemonadeand sells it competitively. To secure its activity,VannasBrew must rent a factory space at thecost of 15 00O SEK/month. The production ofone bottle of raspberry lemonade costs thefirm 32 SEK. As long as its monthly productionis less than 40 000 bottles a month,VannasBrew can store its output on its ownpremises before it is shipped to the stores. Ifthe production exceeds 40 000 bottles thecompany can rent additional storage at thecost of 2 SEK/bottle per month.(a) Describe the firm's average fixed cost,average variable cost, average cost, and itsmarginal cost.(b) Assume the current market price for abottle of raspberry lemonade is 33 SEK/bottle.Explain how much the firm should produce inorder to maximise its profits. Calculate theprofits of the firm.(c) VannasBrew could increase its own storagecapacity to 60 000. This means that if itsproduction exceeds 60 000 the firm will rentadditional storage capacity at the cost of 2SEK/bottle, whereas if the production is below60 000 the firm does not need additionalstorage space. The market price for theraspberry lemonade and all other costs areleft unchanged. Is the firm prepared to pay anadditional 15 000 SEK/month to increase itsstorage capacity at the current market price of33 SEK/bottle?

Since the question you have posted consists of multiple parts, we will answer the first two parts…

Answered: VannasBrew produces raspberry lemonade…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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