Your firm has discovered a cheap and efficient technology of turning used plastic bottles and bags into various products. You limit your attention to the following two production opportunities: you can produce plastic utensils or helmets for Boilermakers' fans. In the first case your estimated annual revenue is K25,000, while the production will cost you K8,000. However, in your second option, you expect to sell 2000 helmets every year at K10 each, and the average total cost of every helmet will be K2. a. Which production opportunity will you choose and why? b. If you do so, what will be your economic profit if your answer is lower explain technically why it is so?
Your firm has discovered a cheap and efficient technology of turning used plastic bottles and bags into various products. You limit your attention to the following two production opportunities: you can produce plastic utensils or helmets for Boilermakers' fans. In the first case your estimated annual revenue is K25,000, while the production will cost you K8,000. However, in your second option, you expect to sell 2000 helmets every year at K10 each, and the average total cost of every helmet will be K2. a. Which production opportunity will you choose and why? b. If you do so, what will be your economic profit if your answer is lower explain technically why it is so?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Your firm has discovered a cheap and efficient technology of turning used plastic
bottles and bags into various products. You limit your attention to the following two
production opportunities: you can produce plastic utensils or helmets for
Boilermakers' fans. In the first case your estimated annual revenue is K25,000, while
the production will cost you K8,000. However, in your second option, you expect to
sell 2000 helmets every year at K10 each, and the
will be K2.
a. Which production opportunity will you choose and why?
b. If you do so, what will be your economic profit if your answer is lower explain technically why it is so?
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