Bavarian Crystal Works designs and produces lead crystal wine decanters for export to international markets. The production
Question:
Bavarian Crystal Works designs and produces lead crystal wine decanters for export to international markets. The production manager of Bavarian Crystal Works estimates total and marginal production costs to be
TC = 10,000 + 40Q + 0.0025Q2
and
MC = 40 + 0.005Q
where costs are measured in U.S. dollars andQ is the number of wine decanters produced annually. Because Bavarian Crystal Works is only one of many crystal producers in the world market, it can sell as many of the decanters as it wishes for $70 apiece. Total and marginal revenue are
TR = 70Q and MR = 70
where revenues are measured in U.S. dollars and Q is annual decanter production.
a. What is the optimal level of production of wine decanters? What is the marginal revenue from the last wine decanter sold?
Managerial Economics Foundations of Business Analysis and Strategy
ISBN: 978-0078021718
11th edition
Authors: Christopher Thomas, S. Charles Maurice