Business, 30.03.2020 17:30 jefarmjefarm9659

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 and Q 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.

NOTE: Do the following before Pt. A: Produce a chart in Excel showing TC & TR with Q on the horizontal axis. Have Q go from 0 to 15,000 units. Produce a second chart showing MC & MR with Q again on the horizontal axis.

A. What is the optimal level of production of wine decanters? What is the marginal revenue from the last wine decanter sold?

B. What are the total revenue, total cost, and net benefit (profit) from selling the optimal number of wine decanters?

C. At the optimal level of production of decanters, an extra decanter can be sold for $70, thereby increasing total revenue by $70. Why does the manager of this firm NOT produce & sell one more unit?

D. At the optimal level of production of decanters, an extra decanter can be sold for $70, thereby increasing total revenue by $70. Why would the manager of this firm NOT produce & sell either one more or one less unit?

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Bavarian Crystal Works designs and produces lead crystal wine decanters for export to international...

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