Question
A company has three machines that make widgets. The marginal cost (MC) of producing a widget on each of the three machines is constant but
A company has three machines that make widgets. The marginal cost (MC) of producing a widget on each of the three machines is constant but different across the three machines: MC1 = $2, MC2 = $5, MC3 = $15. where MC1 is the marginal cost of making a widget on machine 1, MC2 is marginal cost on machine 2, etc. Assume the company has no fixed costs. Each machine has a capacity of only 2,000 widgets.
The company sells widgets to three customers. Customer 1 has offered to pay $20 per widget for up to 2,000 widgets; customer 2 has offered to pay $15 per widget for up to 2,000 widgets; customer 3 has offered to pay $10 per widget for up to 2,000 widgets.
If the firm wants to maximize profits what is the profit?
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