AEC 251 problem set 1_fall 2018

Mc is the cost of adding 1 more good while mr is the

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MC is the cost of adding 1 more good while MR is the revenue from that 1 good. With these too equal it makes it, so you don’t produce too much. 11. You are the manager of a U-pick raspberry farm, and you have to decide how many customers to admit into your raspberry field each hour. Assume that each customer stays exactly one hour. Customers are costly to admit because they inflict wear and tear on the trellis system, fencing, etc. Moreover, each additional customer generates more wear and tear than the customer before. As a result, the farm faces increasing marginal cost. The accompanying table shows the marginal costs associated with each number of customers per hour. A) Suppose that each customer pays $24.75 for a one-hour “all you can pick” session. Use the principle of marginal analysis to find the optimal number of customers that you should admit per hour. If 24.75 is the cost per person, then the marginal cost of the customer needs to be below 24.75 or you start to lose money. In this case the optimal number of customers is 4 because at 5 customers the marginal cost is 25$ so you start losing 25 cents.
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