H ng.cengage.com . .7 "r T MindTap - Cengage Learning ; Rebecca v '::CENGAGE I MINDTAP Q Search this course My Home Problems: Chapters 21 and 22 X 4 . Individual Problems 22-1 Courses Suppose that a paper mill \"feeds" a downstream box mill. For the downstream mill, the marginal protability of producing boxes declines with volume. Catalog and Study Tools For example, the rst unit of boxes increases earnings by $60, the second by $54, the third by $48, and so on, until the tenth unit increases prot by just $6. Rental Options The cost the upstream mill incurs for producing enough paper (one \"unit" of paper) to make one unit of boxes is $6.50. College Success Tips Assume the two mills operate as separate prot centers, and the paper mill sets the price of paper. It follows that the marginal protability of boxes Career Success Tips represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that xed costs are $0 for the paper mill. Hel p The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill Give Feedback at various prices. In the following table, fill in the marginal revenue, total cost, and total prot for the paper mill when selling paper to the box mill at each given price. Total Marginal Price Quantity Revenue Marginal revenue Total Cost Cost Prot (Marginal Profitability to the (Units of paper Box Mill) equivalent to One a) BOX) ($) ($) ($) ($) ($) $60 1 $60 $6.50 $ $ $6.50 $54 2 $108 3 $ $ $6.50 $48 3 $144 $ $ 3 $6.50 $42 4 $168 $ $ $ $6.50 $36 5 $180 5 $ $ $6.50 $30 6 $180 5 $ $ $6.50 $24 7 $168 5 $ $ $6.50 $18 8 $144 3 $ $ $6.50 > Hngcengagecom 'L 'H' T ll 5 E MindTap - Cengage Learning ; Rebecca v ' :CENGAGE I MINDTAP Q Search this course X My Home Problems: Chapters 21 and 22 Courses In the following table, ll In the marginal revenue, total cost, and total prot for the paper mill when selling paper to the box mill at each given price. Catalog and Study Tools Total Marginal Price Quantity Revenue Marginal revenue Total Cost Cost Prot Rental Options (Marginal Profitability to the (Units 0; paper 30" Ml") equivalent to One College Success Tips ($) Bax) ($) (5) (5) (5) ($) $60 1 $60 $6.50 $ Career Success Tips $54 2 $108 $ 5 $650 $ $ $6.50 $48 3 $144 $ $ Help $ $6.50 $42 4 $168 S $ $36 5 $180 $ 3 $650 $ Give Feedback $ $6.50 $30 6 $180 3 $ $ $6.50 $24 7 $168 $ $ 3 $6.50 $18 8 $144 $ $ $ $6.50 $12 9 $108 5 $ $ $6.50 $6 10 $60 $ $ If the paper mill sets the price of paper to sell to the box mill, it will set a price of V and sell V units of paper to the box mill. Prots will be 3 for the paper mill. Companywide prots will he s . (Hint: Recall that the prices in the table represent the marginal protability of each unit of paper, or box, to the box mill.) Suppose the paper mill is forced to transfer paper to the box mill at marginal cost ($6.50). In this case, the box mill will demand V units of paper. This leads to companywide prots of s Continue without saving
