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A businessperson is setting up a new dry cleaning store and is choosing between two fully automated cleaning machines. The first machine can process up
A businessperson is setting up a new dry cleaning store and is choosing between two fully automated cleaning machines. The first machine can process up to 2,000 pieces of clothing per month at a marginal cost of $1 per piece of clothing. The second machine can also process up to 2,000 pieces of clothing per month but at a marginal cost of $0.50 per piece of clothing. The monthly lease for the machine with the higher marginal cost is $1,500. The monthly lease for the machine with the lower marginal cost is $1,870. The dry cleaner can sell the service of cleaning for $5 per piece. Suppose the businessperson chooses to lease the machine with the higher marginal cost for the first month and does indeed process 2,000 pieces of clothing in that month. What is the businessperson's profit in the first month? 16. Suppose now the businessperson chooses to lease the machine with the lower marginal cost for the second month and again processes 2,000 pieces of clothing in that month. What is the businessperson's profit in the second month? 17. If the dry cleaner will process 2,000 pieces of clothing per month, in the long run the optimal machine to lease is the one with the a. lower marginal cost. b. higher marginal cost
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