b. Whet would Paducah's profit-maximizing level of output be if the government imposed a tax of $10 per day on the company? (Hint Think of this tax as equivalent to a $10 increase in fixed cost) bats c What would Paducah's profit maximizing level of output be if the government imposed a tax of $2 per bat instead of the $10 tax of part b? (Hint Think of this tax as a $2 per bat increase in the firm's marginal cost) bats d. Why do the taxes in parts b and chave such different effects? O A tax of $10 per day doesn't affect the firm's profit, while a tax of $2 per bat does. OA tax of $10 per day affects the firm's profit, while a tax of $2 per bat does not O A tax of $10 per day affects marginal cost, while a tax of $2 per bat does not O A tax of $10 per day does not affect marginal cost, while a tax of $2 per bat does

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
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Chapter16: Labor Markets
Section: Chapter Questions
Problem 16.6P
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Paducah Slugger Company makes baseball bats out of lumber supplied to it by Acme Sporting Goods, which pays Paducah $10 for
each finished bat. Paducah's only factors of production are lathe operators and a small building with a lathe. The number of bats per
day it produces depends on the number of employee-hours per day, as shown in the table below.
a. The wage is $15 per hour and Paducah's daily fixed cost for the lathe and bulding is $60
Instructions: Complete the table below. If you are entering any negative numbers be sure to include a negative sign (-) in front of
those numbers. Express marginal cost values rounded to the nearest penny (two decimal places).
Number of
Total
Total labor
Marginal
Q (bats per employee-hours per
day)
revenue
cost
Total cost
Profit
cost
day
(8 per day) (S per day)
(S per day)
60
($ per day)
60
-25
per bat
in
50
15
75
1e
30
90
10
150
200
250
300
350
30
35
25
15
4
60
120
20
105
165
25
1
165
225
30
16
240
300
35
22
390
40
OEE
What is the profit-maximizing quantity of bats (note the values for MR and MC)?
bats.
b. Whet would Paducah's profit-maximizing level of output be if the government imposed a tax of $10 per day on the company?
(Hint Think of this tax as equivalent to a $10 increase in fixed cost)
bats
c What would Paducah's profit-maximizing level of output be if the government imposed a tax of $2 per bat instead of the $10 tax of
part b? (Hint. Think of this tax as a $2 per bat increase in the firm's marginal cost)
bats
d. Why do the taxes in parts b and chave such different effects?
O A tax of $10 per day doesn't affect the firm's profit, while a tax of $2 per bat does,
O A tax of $10 per day affects the firm's profit, while a tax of $2 per bat does not
OA tax of $10 per day affects marginal cost, while a tax of $2 per bat does not
O A tax of $10 per day does not affect marginal cost, while a tax of $2 per bat does.
Transcribed Image Text:Paducah Slugger Company makes baseball bats out of lumber supplied to it by Acme Sporting Goods, which pays Paducah $10 for each finished bat. Paducah's only factors of production are lathe operators and a small building with a lathe. The number of bats per day it produces depends on the number of employee-hours per day, as shown in the table below. a. The wage is $15 per hour and Paducah's daily fixed cost for the lathe and bulding is $60 Instructions: Complete the table below. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Express marginal cost values rounded to the nearest penny (two decimal places). Number of Total Total labor Marginal Q (bats per employee-hours per day) revenue cost Total cost Profit cost day (8 per day) (S per day) (S per day) 60 ($ per day) 60 -25 per bat in 50 15 75 1e 30 90 10 150 200 250 300 350 30 35 25 15 4 60 120 20 105 165 25 1 165 225 30 16 240 300 35 22 390 40 OEE What is the profit-maximizing quantity of bats (note the values for MR and MC)? bats. b. Whet would Paducah's profit-maximizing level of output be if the government imposed a tax of $10 per day on the company? (Hint Think of this tax as equivalent to a $10 increase in fixed cost) bats c What would Paducah's profit-maximizing level of output be if the government imposed a tax of $2 per bat instead of the $10 tax of part b? (Hint. Think of this tax as a $2 per bat increase in the firm's marginal cost) bats d. Why do the taxes in parts b and chave such different effects? O A tax of $10 per day doesn't affect the firm's profit, while a tax of $2 per bat does, O A tax of $10 per day affects the firm's profit, while a tax of $2 per bat does not OA tax of $10 per day affects marginal cost, while a tax of $2 per bat does not O A tax of $10 per day does not affect marginal cost, while a tax of $2 per bat does.
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