Aqua Novelties sells a variety of beach gear, including beach balls, which it sells wholesale to a variety of kinds of retailers. Aqua’s monthly total costs for production of beach balls is
TC = 25,000 + 12.50 q + 0.004 q2,
where q is measured as cases of beach balls. All of Aqua’s fixed costs associated with beach balls are unavoidable in the short run.
a) Given the prices of its competitors, Aqua is able to charge $29.50 per case of beach balls. In the short run, how many cases of beach balls should Aqua produce?
b) What are Aqua’s monthly profits (or losses) producing the quantity you found in part a)?
c) Assuming Aqua expects none of the relevant facts to change in the long run, what should Aqua plan for its long-run production of beach balls to be?