smiling cow dairy can sell all the milk it wants for $4 agallon, and it can rent
ID: 1234073 • Letter: S
Question
smiling cow dairy can sell all the milk it wants for $4 agallon, and it can rent all the robots it wants to milk the cows ata capital rental price of $100 a day . it faces the followingproduction scedule : Number ofRobots Total Product 0 0 gallons 1 50 2 85 3 115 4 140 5 150 6 155how many robots should the firm rent ? explain . smiling cow dairy can sell all the milk it wants for $4 agallon, and it can rent all the robots it wants to milk the cows ata capital rental price of $100 a day . it faces the followingproduction scedule : Number ofRobots Total Product 0 0 gallons 1 50 2 85 3 115 4 140 5 150 6 155
Explanation / Answer
The firm wants to maximize profit = revenue -cost. No. of robots Total revenue Total cost 0 0 0 1 200 100 2 340 200 3 460 300 4 560 400 5 600 500 6 620 600 We see here that profit is maximized at either 3 or 4 robots, wherethe company makes 160 in profit.
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