Asked by Kelsey Whalen on Jun 11, 2024
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Sarah's Pretzel plant has the following short-run cost function: where q is Sarah's output level, w is the cost of a labor hour, and K is the number of pretzel machines Sarah leases. Sarah's short-run marginal cost curve is At the moment, Sarah leases 10 pretzel machines, the cost of a labor hour is $6.85, and she can sell all the output she produces at $35 per unit. If the cost per labor hour rises to $7.50, what happens to Sarah's optimal level of output and profits?
Short-Run Marginal Cost Curve
A graph that shows the cost of producing one more unit of a good or service in the short term, when some factors of production are fixed.
Optimal Level
The most efficient, effective, or desirable point or degree in a process, situation, or system.
Leases
Legal agreements that allow for the use of property or equipment for a specified time in exchange for payment.
- Examine the influence of changing input expenses on an enterprise's output and strategies for achieving maximum profitability in a perfectly competitive environment.
- Identify the optimum production quantity, gain, or loss through evaluation of cost functions and market price points.
Verified Answer
Learning Objectives
- Examine the influence of changing input expenses on an enterprise's output and strategies for achieving maximum profitability in a perfectly competitive environment.
- Identify the optimum production quantity, gain, or loss through evaluation of cost functions and market price points.
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