Deriving cost curves, verbal description of production. (9 points) Joey operates a lemonade stand....

Question

Deriving cost curves, verbal description of production. (9 points) Joey operates a lemonade stand. His cost of the lemons, sugar, and water per glass is $0.15. Joey’s fixed cost is $180. Joey sells five glasses of lemonade per hour. (a) (4 points) When he was eight years old, Joey had a near zero opportunity cost of time. What was Joey’s total cost function, T C(Q) where Q represents the number of glasses of lemonade? (b) (5 points) Joey is now 17. If he were not selling lemonade, he would be working the first six hours a day at $6 per hour and he would be spending the remainder of the day with his friends. Joey’s total value of the time he spends with his friends, t, is 6t + t 2 , where time is measured in hours. Assuming that the descripion of his lemonade business continues to hold, what is Joey’s total cost function T C(Q)? The total cost function should be a function of numbers and Q alone, which means you should substitute out for t. 2 HINT: The total cost funtion will have 2 pieces, when Q = Qthreshold matching what happens when Joey sells for 6 hours or less and when Q > Qthreshold matching what happens when he sells for more than 6 hours. For each piece, consider the opportunity costs in terms of glasses of lemonade (in addition to the costs in part (a)).

Robert · Accepted Answer

a) Total cost = Fixed Cost + variable Cost 
Fixed cost = $ 180 
Unit variable cost = $ 0.15 
Let the total quantity sold be Q 
Then, TC(Q) = 180 + 0.

Deriving cost curves, verbal description of production. (9 points) Joey operates a lemonade stand. His cost of the lemons, sugar, and water per glass is $0.15. Joey’s fixed cost is $180. Joey sells...

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