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    Analyzing cost, output and price relastionships

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    Retirement Planning Services.com is a wholesale producer of standardized retirement plans for high net worth individuals. These plans are produced and e-mailed to financial planners who incorporate them in their client presentations. The following relation exists between the firm's output and total production costs in this highly price-competitive market:

    Total Output Total Cost
    0 $ 50
    100 150
    200 275
    300 425
    400 600
    500 800
    600 1,050
    700 1,350

    A. Construct a table showing the firm's marginal cost of production.
    B. What is the minimum price necessary for the firm to supply one hundred plans?
    C. How many plans would the firm supply at industry prices of $180 and $300 per hundred?

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    Solution Preview

    Please refer attached file for better clarity of table.

    A. Construct a table showing the firm's marginal cost of production.

    Total output, Q Total Cost, TC Marginal Cost Marginal Cost
    MC* per plan MC per hundred
    MC per plan*100
    0 50
    100 150 1.00 100
    200 ...

    Solution Summary

    Solution describes the steps to calculate marginal cost of production. It also explains methodology to find out the number of plans that firm will supply at given price levels.