Acme is a small producer of maple syrup, which it sells in a competitive market at...
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Acme is a small producer of maple syrup, which it sells in a competitive market at the going market price p. An econometric estimation of Acme's costs suggests that this coming month (February 2023), due to existing commitments and contracts with suppliers, its cost function is: C(Q) = 0.002Q³ — 0.6Q² + 75Q + 2,312, where Q is the number of gallons of maple syrup it produces in a month and C is its (total) cost per month in dollars. This implies that the firm's marginal cost is MC(Q) = 0.006Q² — 1.2Q + 75. (See graph below). The graph to your right, with quantities (in gallons per month) on the horizontal axis and costs per gallon (in dollars) on the vertical axis, represents Acme's marginal cost curve (MC, in yellow), average cost curve (AC, in red) and average variable cost curve (AVC, in purple). If you rely on an equation in this graph for your answers, and that equation was not already given in the prompt, you must show how you obtained that equation. For your convenience, some of the values in the graph are given in the following table: 150 100- 50 100 150 200 250 Q 100 160 170 180 200 AC $44.40 $44.64 $46.56 50 80 130 150 $96.24 $68.70 $58.12 $48.59 $45.41 $44.65 AVC $50.00 $39.80 $35.00 $30.80 $30.00 $30.20 $30.80 $31.80 $35.00 MC $30.00 $17.40 $15.00 $20.40 $30.00 $36.60 $44.40 $53.40 $75.00 a) Suppose Acme faces a going market price of $53.40 per gallon and is currently producing 180 gallons a month. Is Acme maximizing its profit? Why or why not? Explain. b) Suppose Acme faces a going market price of $36.60 per gallon and is currently producing 160 gallons a month. Is Acme maximizing its profit? Why or why not? Explain. c) Suppose Acme faces a going market price of $20.40 per gallon and is currently producing 130 gallons a month. Is Acme maximizing its profit? Why or why not? Explain. d) How will your answers to (a), (b) and (c) above change if the government introduces a business tax of $1,000 a month? Acme is a small producer of maple syrup, which it sells in a competitive market at the going market price p. An econometric estimation of Acme's costs suggests that this coming month (February 2023), due to existing commitments and contracts with suppliers, its cost function is: C(Q) = 0.002Q³ — 0.6Q² + 75Q + 2,312, where Q is the number of gallons of maple syrup it produces in a month and C is its (total) cost per month in dollars. This implies that the firm's marginal cost is MC(Q) = 0.006Q² — 1.2Q + 75. (See graph below). The graph to your right, with quantities (in gallons per month) on the horizontal axis and costs per gallon (in dollars) on the vertical axis, represents Acme's marginal cost curve (MC, in yellow), average cost curve (AC, in red) and average variable cost curve (AVC, in purple). If you rely on an equation in this graph for your answers, and that equation was not already given in the prompt, you must show how you obtained that equation. For your convenience, some of the values in the graph are given in the following table: 150 100- 50 100 150 200 250 Q 100 160 170 180 200 AC $44.40 $44.64 $46.56 50 80 130 150 $96.24 $68.70 $58.12 $48.59 $45.41 $44.65 AVC $50.00 $39.80 $35.00 $30.80 $30.00 $30.20 $30.80 $31.80 $35.00 MC $30.00 $17.40 $15.00 $20.40 $30.00 $36.60 $44.40 $53.40 $75.00 a) Suppose Acme faces a going market price of $53.40 per gallon and is currently producing 180 gallons a month. Is Acme maximizing its profit? Why or why not? Explain. b) Suppose Acme faces a going market price of $36.60 per gallon and is currently producing 160 gallons a month. Is Acme maximizing its profit? Why or why not? Explain. c) Suppose Acme faces a going market price of $20.40 per gallon and is currently producing 130 gallons a month. Is Acme maximizing its profit? Why or why not? Explain. d) How will your answers to (a), (b) and (c) above change if the government introduces a business tax of $1,000 a month?
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Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey
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