Botco, inc. is constructing remote-controlled cars to sell to hobbyists. after doing some analysis, Botco's chief economist reported that, at the current level of output per month, the marginal benefit for making remote-controlled cars exceeds the marginal cost of making them.
Furthermore, the economist stated: "In future months, if Botco continues to increase its output per month, the marginal benefit of each additional car will continue to fall, while the marginal cost of each additional car will continue to rise." (You can assume that this effect will persist indefinitely.)
1. Given the above information, Is Botco making the optimum number of cars per month (the number that will yield the greatest total benefit/profit)? YES or NO
2. Should they make more or fewer cars per month?
3. How will they decide when they are making too many per month?
4. If it were possible, what would be the perfect (optimal) amount? Briefly Explain.
Thank you!
Botco, inc. is constructing remote-controlled cars to sell to hobbyists. after doing some analysis, Botco's chief economist reported that, at the current level of output per month, the marginal benefit for making remote-controlled cars exceeds the marginal cost of making them.
Furthermore, the economist stated: "In future months, if Botco continues to increase its output per month, the marginal benefit of each additional car will continue to fall, while the marginal cost of each additional car will continue to rise." (You can assume that this effect will persist indefinitely.)
1. Given the above information, Is Botco making the optimum number of cars per month (the number that will yield the greatest total benefit/profit)? YES or NO
2. Should they make more or fewer cars per month?
3. How will they decide when they are making too many per month?
4. If it were possible, what would be the perfect (optimal) amount? Briefly Explain.
Thank you!
