Asked by Brooke Lazok on Apr 29, 2024
Verified
Spacely Sprockets' short-run cost curve is: 
where q is the number of Sprockets produced and K is the number of robot hours Spacely hires. Currently, Spacely hires 10 robot hours per period. The short-run marginal cost curve is: 
If Spacely receives $250 for every sprocket he produces, what is his profit maximizing output level? Calculate Spacely's profits.
Short-Run Cost Curve
A curve that shows how production costs change as output is increased or decreased, assuming some inputs are fixed.
Profit Maximizing
The process of adjusting production and sale strategies to achieve the maximum possible profit.
- Ascertain the production level that ensures maximum profitability for firms encountering assorted competitive circumstances and recognize the occurrence of economic profits or losses.
Verified Answer
ZK
Zybrea KnightMay 06, 2024
Final Answer :
The profit maximizing output level is where the market price equals marginal cost (providing the price exceeds the average variable cost). To determine the optimal output level, we need to first equate marginal cost to the market price. That is, 
The average variable cost at this output level is: 
Since 
Spacely will maximize profits at 50 units. Spacely's profits are: 
The average variable cost at this output level is: Since Spacely will maximize profits at 50 units. Spacely's profits are: 
Learning Objectives
- Ascertain the production level that ensures maximum profitability for firms encountering assorted competitive circumstances and recognize the occurrence of economic profits or losses.