Name Class Date
Remember: Total Revenue (TR) = P x Q
Marginal
Cost (MC) = change in TC_
change in Q
Marginal
Revenue (MR) = change in TR_
change in Q
Total
Cost (TC) = Fixed Costs + Variable Costs (just add all costs together)
Read
the following passage and answer questions 1-7.
Company X now produces 200 ties, which costs it a total of $2,000 to make. They want to make 50 additional ties, bringing its production to 250; this would increase its cost to $2,500. They can sell each tie for $25.
1. What is the
Total Revenue from selling 200 ties? __________________________________________
2. What is the
Total Cost to produce 200 ties? ______________________________________________
3. What is the
Total Revenue from selling 250 ties? __________________________________________
4. What is the
Total Cost from selling 250 ties? _____________________________________________
5. What is the
marginal cost of producing each additional tie?
__________________________________
6. What is the
marginal revenue from selling each additional tie?
_______________________________
7. Based on
these numbers, should Company X produce additional 50 ties?
_______________________
Why?
_____________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
Read
the following passage and answer questions 8-10. You may need to also refer to the passage and/or questions 1-7
above.
Company X hires Bob. Working part-time, he can produce 10 ties per day. The company will pay Ted $50 per day to make the ties.
~
Remember to factor in marginal cost.
~
Remember to factor in the selling price of the ties.
8. Given the
information above, what is the Total Cost of making these 10 additional ties?
(factor in all
costs) _______________________________
9. What is the
Total Revenue from selling these 10 additional ties?
_____________________________
10. Should
Company X hire Bob? __________ Why?
(fully explain) ______________________________
__________________________________________________________________________________
__________________________________________________________________________________