Company B designs and produces crystal wine decanters. The production manager estimates total and marginal costs to be: TC = $10,000 + 40Q + 0.0025Q(squared) and MC= 40 + 0.005Q.
Costs are measured by US dollars and Q is the number of wine decanters produced annually. It can sell decanters at $70 each. Total and marginal revenue are: TR=70Q and MR+70.
1. What is the optimal level of production of wine decanters?
2. What is the marginal revenue from the last wine decanter sold?
3. What are the total revenue, total cost, and net benefit from selling the optimal number of wine decanters?
4. At the optimal level of production, an extra decanter can be sold for $70, thereby increasing total revenue by $70. Why does the firm not produce and sell one more unit?