A brewery produces regular beer and a lower-carbohydrate "light" beer. Steady customers of the brewery buy 10 units of regular beer and 17 units of light beer monthly. While setting up the brewery to produce the beers, the management decides to produce extra beer, beyond that needed to satisfy customers. The cost per unit of regular beer is $29,000 and the cost per unit of light beer is $35,000. Every unit of regular beer brings in $100,000 in revenue, while every unit of light beer brings in $400,000 in revenue. The brewery needs at least $12.000,000 in revenue, and has determined that the total demand will be at least 45 units of beer. Complete parts (a) and (b). (a) How much of each type of beer should be made so as to minimize total production costs? 20 units of regular beer and 25 units of light beer should be made, for a minimum total cost of $ 1455000. (Type integers or decimals.) (b) Suppose the minimum revenue is increased to $12,600,000. Use shadow costs to calculate the total production cost. The shadow cost of production is $. The increased minimum revenue corresponds to a total production cost of $ (Type integers or decimals.)

A brewery produces regular beer and a lower-carbohydrate "light" beer. Steady customers of the brewery buy 10 units of regular beer and 17 units of light beer monthly. While setting up the brewery to produce the beers, the management decides to produce extra beer, beyond that needed to satisfy customers. The cost per unit of regular beer is $29,000 and the cost per unit of light beer is $35,000. Every unit of regular beer brings in $100,000 in revenue, while every unit of light beer brings in $400,000 in revenue. The brewery needs at least $12.000,000 in revenue, and has determined that the total demand will be at least 45 units of beer. Complete parts (a) and (b). (a) How much of each type of beer should be made so as to minimize total production costs? 20 units of regular beer and 25 units of light beer should be made, for a minimum total cost of $ 1455000. (Type integers or decimals.) (b) Suppose the minimum revenue is increased to $12,600,000. Use shadow costs to calculate the total production cost. The shadow cost of production is $. The increased minimum revenue corresponds to a total production cost of $ (Type integers or decimals.)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 3MC

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