Redstone Clayworks, Inc a small firm located in Sedona, manufactures clay fire puts that homeowners place their patios for decoration and light-duty heating. Redstone is one of 53 firms worldwide supplying clay fire pits to retailers such as Home Depot, Lowes, Front Gate and other upscale home product chains. Despite the best marketing efforts of these retailers to differentiate their individual brands of fire pits, consumers don't care much about brands: A clay fire pit, regardless of who sells it the following spreadsheet below provides data on Redstone's costs of production
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(1)
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(2)
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(3)
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(4)
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Q
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TC
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TFC
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TVC
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0
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5000
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5000
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0
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100
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10000
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5000
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5000
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200
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1900
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5000
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14000
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300
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27000
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5000
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22000
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400
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38000
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5000
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33000
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500
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50000
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5000
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45000
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600
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66000
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5000
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61000
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700
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84000
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5000
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79000
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800
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104000
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5000
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99000
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900
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126000
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5000
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121000
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1000
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150000
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5000
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145000
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a. Create a spreadsheet using Excel that matches the one above entering the output and cost data given about. Then use appropriate formulas to create four new columns in your spreadsheet for average fixed cost ( AFC), average variable cost ( AVC), average total cost ( ATC) and short run marginal cost ( SMC). {Computation check; AT Q =400, SMC=$110}
The world demand and supply curve for clay fire pits at $ 190 per unit.
b. Use the appropriate formula to create two more columns in your spreadsheet for total revenue ( TR) marginal revenue ( MR). Computation check: AT Q=400: MR= $ 190
C. Use the appropriate formula to create two more columns in your spreadsheet for total revenue for profit ( PROF), average profit ( AVGPROF), and profit margin ( PROFMARG). Computation check: AT Q=400: AVGPROG= $ 95}
a. If redstone's manager wishes to minimize average total cost, how many clay fire pits should be produced? How many to maximize profit margin?
b. Redstone's manager is fired, and you are now the manager of Redstone Clayworks. How many fire pits would you choose to produce and why?
c. Now triple the total fixed cost to $ 15000 in your spreadsheet, How does this change your production decision in part e? Explain briefly
d. Suppose a congressional environmental panel announces that greenhouse gasses from clay fire pits are contributing significantly to global warming. The announcement causes world -wide demand for fire pits to shrink substantially, and clay fire-pits prices fall to $ 65 per unit. How does this change your production decision in part e? Explain briefly: Note: Return total fixed cost to the original level of $5,000