Question

A key component of the phone is its specialized memory chip, which the firm produces for its own use and also sells to outside byers. The chip’s selling price is $40 and its marginal cost is $20. In fact, the firm can produce and sell all (i.e., its full capacity) of its chips to outside byers. What is the opportunity cost associated with the chips? What is the true marginal cost of each cell phone? What are the firm’s optimal output and price?

Name: a key component of the phone is its specialized memory chip which the firm produces for its own use and also sells to outside byers the chips selling price is 40 and its marginal cost is 20 37717
Uploaded: 2024-03-04T04:55:22-08:00
Duration: 1 min 18 s
Channel: Andrew Noble
Description: a key component of the phone is its specialized memory chip which the firm produces for its own use and also sells to outside byers the chips selling price is 40 and its marginal cost is 20 37717

          A key component of the phone is its specialized memory chip, which the firm produces for its own use 
and also sells to outside byers. The chip’s selling price is $40 and its marginal cost is $20. In fact, the 
firm can produce and sell all (i.e., its full capacity) of its chips to outside byers. 
What is the opportunity cost associated with the chips?
What is the true marginal cost of each cell phone? 
What are the firm’s optimal output and price?

Added by Duane T.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Andrew Noble

03/04/2024

Step 1

The opportunity cost is the value of the next best alternative foregone. In this case, the firm can sell the chips to outside buyers for $40 each. If the firm uses the chips in its own phones instead of selling them, it foregoes the $40 revenue per chip. Show more…

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A key component of the phone is its specialized memory chip, which the firm produces for its own use and also sells to outside byers. The chip’s selling price is $40 and its marginal cost is $20. In fact, the firm can produce and sell all (i.e., its full capacity) of its chips to outside byers. What is the opportunity cost associated with the chips? What is the true marginal cost of each cell phone? What are the firm’s optimal output and price?