How do you draw the ATC curve and the MC curve for this Scenario? THE RESILIENTARMOUR...

How do you draw the ATC curve and the MC curve for this Scenario?

THE RESILIENTARMOUR Corporation is an American company that manufactures cost-effective protective covers for automobiles made out of innovative composite material, which currently are being sold only in the United States. ResilientArmour currently produces and sells 100,000 protective covers a month and operates its one factory at 60 percent capacity. At that output, the average total cost (ATC) of manufacturing a protective cover is $19.00. Experience has shown that the ATC decreases as output is expanded beyond 100,000 units per month but rises again if output is increased above 125,000 units per month.

THE RESILIENTARMOUR Corporation normally sells its protective covers domestically for $24.00 each. It recently received an order for an additional 10,000 protective covers per month from a buyer in a foreign country where THE RESILIENTARMOUR Corporation would like to do business. This buyer specified that it would pay no more than $14.00 per protective cover. The firm’s accountants estimate that at 110,000 units a month, the ATC of producing a protective cover would be $18.00. THE RESILIENTARMOUR executives want to accept the order.

ASSIGNMENT INSTRUCTIONS:

Draw the firm’s ATC curve and fit the MC curve to it. Then estimate MC at Q = 110,000. Use the profit-maximizing rules (assume P = MR for this paper) to answer the following questions:

Expert Solution

Rahul Sunny answered 2 years ago

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