What is the marginal revenue from last wine decanter sold

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Reference no: EM131195957

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 the 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 the annual decanter production.

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 the total revenue by $70. Why does the manager of this firm not produce and sell one more unit?

Reference no: EM131195957

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