A local snow cone business sells snow cones in one size for $5. It has the follo
ID: 1202212 • Letter: A
Question
A local snow cone business sells snow cones in one size for $5. It has the following cost and output structure per hour.
Output (cones per hour)
Total Cost (per hour)
0
$40
10
85
20
120
30
145
40
160
50
195
60
245
70
300
80
370
a) Calculate the total revenue for the business at each rate of output. ($500)
b) Calculate the total profit for the business at each rate of output. ($500)
c) Is the business operating in the short run or the long run? ($500)
d) Calculate the profit maximizing rate of output using the MR = MC rule. (Note: to do this you should first compute the marginal revenue and marginal cost from the table.) ($500)
Answer:
Output (cones per hour)
TR
Total Cost (per hour)
Profit
MR
MC
0
10
20
30
40
50
60
70
80
Output (cones per hour)
Total Cost (per hour)
0
$40
10
85
20
120
30
145
40
160
50
195
60
245
70
300
80
370
Explanation / Answer
Output (cones per hour)
TR(P*Q)
P = $5
($)
Total Cost (per hour) ($)
Profit ($)
MR($)
MC($)
0
0
40
-40
-
-
10
50
85
-35
50
45
20
100
120
-20
50
35
30
150
145
5
50
25
40
200
160
40
50
15
50
250
195
55
50
35
60
300
245
55
50
50
70
350
300
50
50
55
80
400
370
30
50
70
profit maximizing rate of output using the MR = MC rule is: 60 .
Output (cones per hour)
TR(P*Q)
P = $5
($)
Total Cost (per hour) ($)
Profit ($)
MR($)
MC($)
0
0
40
-40
-
-
10
50
85
-35
50
45
20
100
120
-20
50
35
30
150
145
5
50
25
40
200
160
40
50
15
50
250
195
55
50
35
60
300
245
55
50
50
70
350
300
50
50
55
80
400
370
30
50
70
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