Suppose you manage a dog food business. Your business produces 3000 cans of dog food per day, and can sell all cans at $2.00/ can regardless of how much is produced. Your firm currently employs twenty workers, each of whom are paid $15/ hr and work a total of 8 hours/ day. Inputs (meat for the food, metal for the cans), cost $1.00/ can. Your overhead expenses including rent, taxes, insurance, etc. which does not vary w/ the number of cans produced, equals $250/ day.

a) calculate your company's current daily profit

You are considering whether to produce additional cans of dog food. In order to do so you would need to hire more workers, each of whom would be paid $15/ hr. Material costs remain constant at $1.00/ can. You determine that if you hire a 21st employee, your firm would produce an additional 200 cans per day, and that the number of additional cans from each additional worker would be decreasing by 40 (so a 22nd worker could produce an additional 160 cans per day, a 23rd worker could product an additional 20 cans be day, etc).

b) calculate the marginal costs (change to total cost/ change to output) associated with producing additional cans for employees 21 through 25. Each worker works 8 hours/ day

c) If you could sell each can for $2.50, how many employees should you hire, how many additional cans should you produce, and what is your company's new daily profit?

d) Suppose your company's fixed costs were $300 per day instead of $250 per day. What is the profit maximizing number of employees and what is your daily profit?