Evaluating a Marginal Production Decision
A production manager at 'Crafty Candles' is reviewing their output decision. The company is a price-taker in a market where the price for their signature candle is $20. The marginal cost to produce a candle is $16 for any quantity up to a daily capacity of 500 candles. If they produce more than 500, they must use a more expensive process, and the marginal cost for each additional candle jumps to $22. The manager decides to produce 501 candles, arguing that 'the price is well above our main cost, so one extra unit is fine.' Evaluate the manager's decision to produce the 501st candle. Specifically, explain whether this single action increases or decreases total profit, and by how much.
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ
Evaluation in Bloom's Taxonomy
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