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Smiling Cow Dairy Milk Producer

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. if 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.

Solution Preview

a. perfect competition, because it has no control over the price it gets for its products.
b. perfect competition, because the price does not respond to how many robots it wants and so at least in theory, it is saying it could by hundred and hundreds if not thousands and that would constitute a very small part of the ...

Solution Summary

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. if faces the following production schedule:

$2.19