Question
BREADWITHCHEESE , a famous multinational company, has just set up operations in Chile. The only product marketed, which it produces discreetly, is cheese bread. To
BREADWITHCHEESE, a famous multinational company, has just set up operations in Chile. The only product marketed, which it produces discreetly, is cheese bread. To produce one unit of cheesy bread, the company requires 2 slices of bread and 1 sheet of cheese. The cost of its unique inputs is $50 per slice of bread and $50 per sheet of cheese. In addition, the market price is $300. Like any new company, it faces high fixed costs, which add up to $1,000,000 per month. The company must make all its payments and define its production level on the first day of each month, receiving all the revenues from monthly sales only on the last day of each month. As cost and budget manager, you are given a budget of $1,900,000 at the beginning of the year (nothing more). Questions:
1. Determine the total cost structure of the company. GRAPH
2. Based on the cost structure found in 1., determine the company's short-term supply. HINT: Given a total cost function of the form TC (q) = a + bq, the marginal cost function will be MC (q) = b.
3. FORMALLY state the choice problem faced by the firm in purchasing inputs in the first month and solve it.
4. Find the quantity produced (q) and the firm's profits.
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