A Manufacturer Produces Two Models of Elliptical Cross-Training Exercise Machines

question 46

Multiple Choice

A manufacturer produces two models of elliptical cross-training exercise machines. The times for assembling,finishing,and packaging model X are 3 hours,3 hours,and 0.8 hour,respectively.The times for model Y are 4 hours,2.5 hours,and 0.4 hour.The total times available for assembling,finishing,and packaging are 6000 hours,4200 hours,and 950 hours,respectively.The profits per unit are $200 for model X and $275 for model Y.What is the optimal production level for each model? What is the optimal profit?
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• A)6000 units of model X 950 units of model Y
• Optimal profit: $1,461,250
• B)950 units of model X 6000 units of model Y
• Optimal profit: $1,840,000
• C)400 units of model X 1200 units of model Y
• Optimal profit: $410,000
• D)950 units of model X 4200 units of model Y
• Optimal profit: $1,345,000
• E)4200 units of model X 950 units of model Y
• Optimal profit: $1,101,250

Understand how to determine a firm's short-run economic profits or losses using total revenue and total cost data.

Apply the marginal revenue equals marginal cost (MR=MC) rule to identify profit-maximizing output levels.

Assess the conditions under which a purely competitive firm will continue production or shut down in the short run.

Recognize the relationship between a firm’s marginal cost curve and its short-run supply curve.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of demand to price changes.

Luxury Tax

A tax imposed on expensive goods and services considered to be non-essential or luxurious.

Yachts

Luxurious, privately owned boats that are used for leisure or sports.

Relatively Inelastic

Describes a situation where the demand for a good or service only slightly changes in response to price changes.