Selecting the apjnopnat level of ancmfi skin the A-1 Corporation supplies airpla

Question

Selecting the apjnopnat level of ancmfi skin the A-1 Corporation supplies airplane manufactures with preformed aircraft skin panels that are used on the exterior of aircraft. Aircraft skin forming machines required to manufacture these panels can be leased on an as needed basis for SI 2,500 each. Given the complexity of working with exotic metals used in the manufacturing process, workers are highly skilled and must be retained at all times. The market price for one of A-1's panels is $70 Based on the production data in the following table, how many aircraft skin forming machines should A-1 lease to maximize profits? Fill in the table. What is the decision rule? What is your decision?

Explanation / Answer

1.

2. The decision rule here will be that till the time incremental profit is positive, company will keep adding extra machine for production.

3. Corporation will be using 3 machines as from 4th machine onwards incremental profit is negative.

Machines Workers Panels Produced Average Product Marginal Product M Product Price P Value of Marginal Product V=M*P Price of Input (Each additional machine) I Incremental profit = V-I 0 6 0 1 6 650 650 650 70 45500 12500 33000 2 6 1100 550 450 70 31500 12500 19000 3 6 1400 467 300 70 21000 12500 8500 4 6 1550 388 150 70 10500 12500 -2000 5 6 1680 336 130 70 9100 12500 -3400 6 6 1720 287 40 70 2800 12500 -9700

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