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suppose lorenzo is currently using combination d, producing one crochet hat per day. his opportunity cost of producing a second crochet hat per day is per day.

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Since the net gain from producing a second hat is positive ($30/day), Lorenzo should produce a second crochet hat per day.

How to solve

To determine whether Lorenzo should produce a second crochet hat per day, we need to calculate the potential gain or loss from producing an additional hat.

Potential gain from producing a second hat:

Number of hats produced = 2 hats/day

Profit per hat = $20/hat

Total profit = Number of hats produced * Profit per hat = 2 hats/day * $20/hat = $40/day

Cost of producing a second hat:

Opportunity cost = $10/day

Net gain or loss:

Net gain or loss = Total profit - Opportunity cost = $40/day - $10/day = $30/day

Since the net gain from producing a second hat is positive ($30/day), Lorenzo should produce a second crochet hat per day.

The Complete Question

Suppose Lorenzo is currently using combination D, producing one crochet hat per day. His opportunity cost of producing a second crochet hat per day is $10. Lorenzo sells each crochet hat for $20. Determine whether Lorenzo should produce a second crochet hat per day.

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