Assume a European company that manufactures decorative fountain pens. The firm is trying to decide whether or not to expand its facilities. Currently, its fixed costs are $750,000 per month, and its average variable costs are $1.25 per pen. If the firm expands, its fixed costs will increase by $350,000 per month but its average variable costs will fall to $0.75 per pen. a. Write out the formula for the firm's current (short run) total cost TC(q), and its (short run) total cost TC(q) if it expands, with q measures the number of pens per month. Suppose the firm has a monthly volume of 600,000 pens. Should it expand? What about if the firm expects its volume to increase to 800,000 pens a month? b.

Assume a European company that manufactures decorative fountain pens. The firm is trying to decide whether or not to expand its facilities. Currently, its fixed costs are $750,000 per month, and its average variable costs are $1.25 per pen. If the firm expands, its fixed costs will increase by $350,000 per month but its average variable costs will fall to $0.75 per pen. a. Write out the formula for the firm's current (short run) total cost TC(q), and its (short run) total cost TC(q) if it expands, with q measures the number of pens per month. Suppose the firm has a monthly volume of 600,000 pens. Should it expand? What about if the firm expects its volume to increase to 800,000 pens a month? b.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

the firm faces additional shipping costs. In particular, it incurs a per unit cost of 10 for shipping output from Factory 1 to the market and a per unit cost of 5 for shipping output from Factory 2 to the market. How much does it charge per unit of output?
words about the negative/positive impacts of Corona virus (COVID19) on tourism sector in Oman
Will the long-run customer relationship and sales gains from the promotion justify its costs?
XYZ company can manufacture their own products and sells them. They are able to control the demand by changing the price that is determined by the equation below. The company is thinking of maximizing their profit. The fixed cost is $1,000 per month and the variable cost is $40 per unit. Find the number of units that must be manufactured and sold monthly to maximize profit. (Demand D in the equation is monthly) Hint: Profit = Total Revenue - Total Cost 2,700 5,000 p = $38 + D for D > 1 D2 1 Add file
Bags/Participants Fixed Cost Variable Cost Total Cost 0 $1,700 $ - $1,700 100 $1,700 $500 $2,200 200 $1,700 $1,200 $2,900 300 $1,700 $2,700 $4,400 400 $1,700 $5,200 $6,900 500 $1,700 $9,000 $10,700 600 $1,700 $15,000 $16,700 700 $1,700 $23,800 $25,500 800 $1,700 $36,800 $38,500 900 $1,700 $55,800 $57,500 1,000 $1,700 $83,000 $84,700 Given the above information on cost, if you charge $15 per entry, what is the breakeven quantity of bags that you should order? At what quantity of bags will profits be maximized? A Use the profit maximizing rule, MR ≥ MC, buy 300 bags. B Use the profit maximizing rule, MR ≥ MC, buy 200 bags. C Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 300. D Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 200.
Quality solution for better ratings please
The 1,850 residents of Great Donut Island are all fishermen. Every morning they go to the nearest port to launch their fishing boats and then return in the evening with their catch. The residents are evenly distributed along the 20-mile perimeter of the island. Each port has a fixed cost of $1,850/day. If the optimal number of ports is 7, what must be the per mile travel cost? Instructions: Round your answer to the nearest penny (2 decimal places).
Process mapping is a tool that reduces processes to their component parts or activities and helps identify and then eliminate non-value-added activities, (waste) or delays within a process. Process mapping is valuable in purchasing, especially when attempting to streamline the flow of material or information between suppliers and a purchaser.
Distinguish between past and present designs in the light of economic efficiency
Does providing customized products generally involve less capital investment or less skilled labor, when compared to more standardized products?
(a) How many vacuums are supposed to be sold to achieve break even? (b) If Primark wants to earn a profit of $36,000, how many vacuum must be sold?