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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Consider total cost and total revenue given in the following table:

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a. Calculate profit for each quantity. How much should the firm produce to maximize profit?

b. Calculate marginal revenue and marginal cost for each quantity. Graph them. (Hint: Put the points between whole numbers. For example, the marginal cost between 2 and 3 should be graphed at 2 1 2 ) At what quantity do these curves cross? How does this relate to your answer to part (a)?

c. Can you tell whether this firm is in a competitive industry? If so, can you tell whether the industry is in a long-run equilibrium?

Subpart (a):

To determine
Profit maximization.

Explanation

Table – 1 represents the value of quantity, total cost, and total revenue.

Table – 1

Quantity Total cost Total revenue
0 8 0
1 9 8
2 10 16
3 11 24
4 13 32
5 19 40
6 27 48
7 37 56

The profit can be calculated by using the following formula:

Profit=Total revenueTotal cost (1)

Substitute the respective value in equation (1) and calculate the profit.

Profit=08=8

The profit is –$8

Subpart (b):

To determine
Profit maximization.

Subpart (c):

To determine
Profit in the long run.

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