Question

Penny is making pipe cleaner flowers to sell on etsy for $1 each. Penny and her friends become more efficient as they gain practice in flower production. The first 100 flowers cost $1.35 each. The next 100 cost $1.20 each. The next 100 cost $1.10 each. The next 100 cost $0.70 each. All the rest cost $0.40 each. What is the marginal cost of the 340th flower? What is the marginal profit of the 340th flower? If penny sells 1000 flowers, how much profit does she earn in total?

Answer 1

Hello dear ☺

Here's the answer ⤵

At 100 flowers, the total cost (TC) is calculated as follows:

TCQ=100=100×1.35=135

At 200 flowers, the total cost is:

TCQ=200=135+100×1.20=255

At 300, 400 and 1,000 units, the total cost is calculated as:

TCQ=300=255+100×1.10=365
TCQ=400=365+100×0.70=435
TCQ=1000=435+600×0.40=675

The marginal cost is the change in total cost per unit change in output.

You can calculate the total cost at the 339th and 340th units.

The change in cost between these units is the marginal cost (MC) of the 340th unit:

TCQ=339=365+39×0.70=392.3
TCQ=340=365+40×0.70=393
MCQ=340=393−392.3=0.70

The marginal cost is the same as the cost of producing one flower after 300 units are produced.

The marginal revenue at 340th flower is its price.

Hence, the marginal profit or per unit profit when the 340th flower is sold is: $0.30 = ($1 - $0.70).

If Penny sells 1,000 flowers, the total cost will be $675, and the total revenue will be $1,000.

Thus, Penny's profit will be $375.

Hope it is helpful to you ✌