Larraine is the only jembe drum producer in Caltouse. She can sell a single drum for $80 but must drop her price by $5 for every extra drum she wants to sell. Her total fixed costs are $60 and the variable cost of the first drum produced is $36. For each drum thereafter, the variable costs drop by $4 up to and including the fourth drum. After that, the cost of each additional drum increases by $4.
a) Draw the AR, MR, AC, and MC curves on the figure below. b) Assuming she cannot sell partial units, what are Larraine's profit-maximizing output and price, and what is her total profit?

Question

Larraine is the only jembe drum producer in Caltouse. She can sell a single drum for $80 but must drop her price by $5 for every extra drum she wants to sell. Her total fixed costs are $60 and the variable cost of the first drum produced is $36. For each drum thereafter, the variable costs drop by $4 up to and including the fourth drum. After that, the cost of each additional drum increases by $4.
a) Draw the AR, MR, AC, and MC curves on the figure below.  b) Assuming she cannot sell partial units, what are Larraine's profit-maximizing output and price, and what is her total profit?

Quizplus · Accepted Answer

The Answer of Larraine is the only jembe drum producer in Caltouse. She can sell a single drum for $80 but must drop her price by $5 for every extra drum she wants to sell. Her total fixed costs are $60 and the variable cost of the first drum produced is $36. For each drum thereafter, the variable costs drop by $4 up to and including the fourth drum. After that, the cost of each additional drum increases by $4.
a) Draw the AR, MR, AC, and MC curves on the figure below.  b) Assuming she cannot sell partial units, what are Larraine's profit-maximizing output and price, and what is her total profit?

Larraine Is the Only Jembe Drum Producer in Caltouse