Isabel runs her family’s small pineapple processing plant, which takes fresh pineapples and cuts them into pineapple rings, spears, and chunks. The capital stock of the firm consists of three machines of various vintages, each of which can process the pineapples into any of the three different forms. All of the machines are in excellent condition, and all machines can be running at the same time. 

a. Assume that “cost of processing” includes all labor and materials, including the owner’s wages. Assume further that Isabel’s family signed a long-term contract (20 years) with a service company to keep the machines in good repair for a fixed fee of $1,825 per year, or $5 per day. 

1. Derive the firm’s marginal cost curve. 

2. Derive the firm’s total cost curve. 

b. At a price of $0.40, how many pineapples would the company process? What would total revenues, total costs, and total profits be?

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Machine 1 Machine 2 Machine 3 Cost of Processing per Pineapple $0.10 0.25 0.50 Maximum Total Capacity (Pineapples) per Day 250 400 500