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Suppose you are managing an oil refinery in a perfectly competitive market that converts crude oil into a particular mix of products, including gasoline, jet
Suppose you are managing an oil refinery in a perfectly competitive market that converts crude oil into a particular mix of products, including gasoline, jet fuel, and residual fuel oil for home heating. 3O 28 Your refinery uses different processing units to turn crude oil into finished products. When a particular 26 processing unit reaches capacity, output can be increased only by substituting a more expensive 24 process. 22 E in particular, the marginal cost (MC) of producing as many as 2,000 barrels of output is g 20 ._ 18 MC(q)= 0.001q; 16 E 14 the marginal cost of producing between 2,000 and 5,000 barrels is a constant g 12 M0 = 2; 'g 10 0 5 and the marginal cost of producing 5,000 to 10,000 barrels is 5 MC(q)=2+0.002(q 5,000). : Using the line drawing tool, draw your refinery's marginal cost curve in the figure to the right. This 00 2000 4000 6000 5000 10000 12000 curve Will be comprised of three line segments labeled MCSegment 1, MCSegmem 2, and Du pm (barrels per cay) MCSegment 3' Carefully follow the instructions above, and only draw the required objects. 9,9
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