Swizzle sticks are used to stir mixed drinks such as Rob Roys, Manhattans, and Jack and Coke. There are many producers of swizzle sticks, selling them in boxes containing 100 swizzle sticks. There are many buyers of swizzle sticks, ranging from bars to airlines to grocery stores. The market demand for swizzle sticks is QD = 20 20P. The market supply for swizzle sticks is QS = 5 + 30P, where P is the price of a box of swizzle sticks and QD and QS are millions of boxes of swizzle sticks.
Happy Hour LLC produces and sells swizzle sticks. Happy Hour's marginal cost for producing boxes of swizzle sticks is MC = 0.1 + 0.002q, where q is the number of boxes of swizzle sticks Happy Hour produces and sells. Happy Hour's average variable cost for producing boxes of swizzle sticks is AVC = 0.1 + 0.001q. Happy Hour runs a dirt-cheap operation, with their fixed cost for producing swizzle sticks at $30.
1. What price should Happy Hour sell their swizzle sticks for?
2. How many boxes of swizzle sticks should Happy Hour produce and sell?
3. How much profit does Happy Hour make from producing and selling their swizzle sticks?
4. The supplier of wood used to produce Happy Hour's swizzle sticks increases his prices. Happy Hour's marginal cost after the price of wood increasing is now MC = 0.1 + 0.003q and its average variable cost is now AVC = 0.1 + 0.002q.
a. How many swizzle sticks do Happy Hour now produce?
b. Should Happy Hour close down their operations since they now have to pay more for the wood? Why or why not?
Swizzle sticks are used to stir mixed drinks such as Rob Roys, Manhattans, and Jack and Coke. There are many producers of swizzle sticks, selling them in boxes containing 100 swizzle sticks. There are many buyers of swizzle sticks, ranging from bars to airlines to grocery stores. The market demand for swizzle sticks is QD = 20 20P. The market supply for swizzle sticks is QS = 5 + 30P, where P is the price of a box of swizzle sticks and QD and QS are millions of boxes of swizzle sticks.
Happy Hour LLC produces and sells swizzle sticks. Happy Hour's marginal cost for producing boxes of swizzle sticks is MC = 0.1 + 0.002q, where q is the number of boxes of swizzle sticks Happy Hour produces and sells. Happy Hour's average variable cost for producing boxes of swizzle sticks is AVC = 0.1 + 0.001q. Happy Hour runs a dirt-cheap operation, with their fixed cost for producing swizzle sticks at $30.
1. What price should Happy Hour sell their swizzle sticks for?
2. How many boxes of swizzle sticks should Happy Hour produce and sell?
3. How much profit does Happy Hour make from producing and selling their swizzle sticks?
4. The supplier of wood used to produce Happy Hour's swizzle sticks increases his prices. Happy Hour's marginal cost after the price of wood increasing is now MC = 0.1 + 0.003q and its average variable cost is now AVC = 0.1 + 0.002q.
a. How many swizzle sticks do Happy Hour now produce?
b. Should Happy Hour close down their operations since they now have to pay more for the wood? Why or why not?
