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Smiling Cow Dairy can sell all the milk it wants for|$4 a gallon, and it can rent all the robots it wants to milk the cows at a capital rental price of $100 a day. It faces the following production schedule: Number of Robots Total Product 0 0 gallons 1 50 2 85 3 115 4 140 5 150 6 155 a. In what kind of market structure does the firm sell its output? How can you tell? b. In what kind of market structure does the firm rent robots? How can you tell? c. Calculate the marginal product and the value of the marginal product for each additional robot. d. How many robots should the firm rent? Explain.

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Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126

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Section
BuyFindarrow_forward

Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126
Chapter 18, Problem 4PA
Textbook Problem
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Smiling Cow Dairy can sell all the milk it wants for|$4 a gallon, and it can rent all the robots it wants to milk the cows at a capital rental price of $100 a day. It faces the following production schedule:

Number of Robots Total Product
0 0 gallons
1 50
2 85
3 115
4 140
5 150
6 155

a. In what kind of market structure does the firm sell its output? How can you tell?

b. In what kind of market structure does the firm rent robots? How can you tell?

c. Calculate the marginal product and the value of the marginal product for each additional robot.

d. How many robots should the firm rent? Explain.

Subpart (a):

To determine

To calculate: Price in the perfect competitive market.

Explanation of Solution

The firm sells their output in a perfectly competitive market. In a perfectly competitive market, there are large...

Subpart (b):

To determine

To calculate: Price in the perfect competitive market.

Subpart (c):

To determine

To calculate: The marginal product and the value of marginal product.

Subpart (d):

To determine

To calculate: The marginal product and the value of marginal product.

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