Question: A 2006 Duke University graduate inherited her mother’s printing company. The capital stock of the firm consists of three machines of various vintages, all in excellent condition. All machines can be running at the same time.
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COST OF PRINTING AND BINDING PER BOOK
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MAXIMUM TOTAL CAPACITY (BOOKS) PER MONTH
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MACHINE 1
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$1.00
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100
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MACHINE 2
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$2.00
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200
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MACHINE 3
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$3.00
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300
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a) Assume that “cost of printing and binding per book” includes all labor and materials, including the owner’s own wages. Assume further that Mom signed a long-term contract ( 50 years) with a service company to keep the machines in good repair for a fixed fee of $100 per month.
(1) Derive the firm’s marginal cost curve.
(2) Derive the firm’s total cost curve.
b) At a price of $2.50, how many books would the company produce? What would the total revenues, total costs, and total profits be?