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Tom, the only steel drum manufacturer in Marnia, can sell a single durn for $60. However, for every extra drum he wants to sell, he
Tom, the only steel drum manufacturer in Marnia, can sell a single durn for $60. However, for every extra drum he wants to sell, he is forced to reduce the price (for all his customers) by $6. The total fixed costs in his workshop are $15, and the variable cost of the first drum produced is $16. For each additional drum thereafter, the cost drops by $2, up to and including the fourth drum. After that, the cost of each extra drum increases by $2. What is Tom's: a) What is Tom's profit maximizing output? (1 mark) b) What is Tom's profit maximizing price?(1 mark) C) Is Tom earning an economic profit or loss?(1 mark) d) How much? (Show your work, 2 mark)
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