Exotic Metals, Inc., a leading manufacturer of beryllium, which is used in many electronic products, estimates the following demand schedule for its product:
PRICE ($/POUND) QUANTITY (POUNDS/PERIOD)
$25 0
18 1,000
16 2,000
14 3,000
12 4,000
10 5,000
8 6,000
6 7,000
4 8,000
2 9,000
Fixed costs of manufacturing beryllium are $14,000 per period. The firm’s variable cost schedule is as follows:
OUTPUT (POUNDS/PERIOD) VARIABLE COST (PER POUND)
0 $0
1,000 10.00
2,000 8.50
3,000 7.33
4,000 6.25
5,000 5.40
6,000 5.00
7,000 5.14
8,000 5.88
9,000 7.00
a. Find the total revenue and marginal revenue schedules for the firm.
b. Determine the average total cost and marginal cost schedules for the firm.
c. What are Exotic Metals’ profit-maximizing price and output levels for the production and sale of beryllium?
d. What is Exotic’s profit (or loss) at the solution determined in Part (c)?
e. Suppose that the federal government announces it will sell beryllium, from its extensive wartime stockpile, to anyone who wants it at $6 per pound. How does this affect the solution determined in Part (c)? What is Exotic Metals’ profit (or loss) under these conditions?