Should the company purchase pulp from the outside

Reference no: EM13190292

The Great Southern Paper Company has the following marginal cost schedule for producing pulp:

Quantity (tons) Marginal Cost
1 $18
2 20
3 25
4 33
5 43
Pulp can be bought in the open market for $25 per ton. The marginal cost of converting pulp into paper is MC= 5 + 5Q, and the demand for paper is P = 135-15Q. Calculate the marginal cost of paper if the company produces its own pulp. What is the profit-maximizing quantity? Should the company purchase pulp from the outside or produce it in-house?

Reference no: EM13190292

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