Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 23, Problem 11E
To determine
To calculate:
The value of TR, MR, MC and profit maximizing level of output. Find the variable costs and the level of producing output.
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Your business, which has some market power, has the following demand (D), marginal revenue (MR), marginal cost (MC), and average cost (AC) curves. Move point E to label the profit-maximizing price and quantity for your firm.
If the goal of your business is to maximize profit, how much will it produce, and what price will it charge?
-The business will exit the market because it is unable to cover its average costs.
-The business will produce 40 units, and charge a price of $5.
-The business will produce 30 units, and charge a price of $3.
-The business will produce 30 units, and charge a price of $6.
Consider total cost and total revenue given in the following table:
Quantity
0
1
2
3
4
5
6
7
Total cost
$8
8
10
11
13
19
27
37
Total revenue
$0
8
16
24
32
40
48
56
a. Calculate profit for each quantity. How much should the firm produce to maximize profut ?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 ) 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?
Quantity sold
Price
3
$10
4
$10
5
$10
(a) In the above table, if the firm sells 5 units of output, what's total revenue?
(b) In the above table, if the quantity sold by the firm rises from 3 to 4, what's marginal revenue?
(c) In the above table, if the quantity sold by the firm rises from 5 to 6, what's average revenue?
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- Assume that the marginal revenue equals rising marginal cost at 100 units of output. At this output level, a profit-maximizing firm's total fixed cost is $700 and its average variable costs are $5. If the price of the product is $4 per unit and the firm produces the profit-maximizing level of output, How much profit firm will earn ?arrow_forwardConsider the total cost and total revenue of Farm Fresh Diary Output Quantity (Milk in Liters) Total Revenue ( in Rupees) Total cost ( in Rupees) 0 0 30 1 80 50 2 160 80 3 240 120 4 320 170 5 400 230 6 480 300 7 560 380 8 640 470 Calculate Price, Average Revenue, Marginal revenue. Explain the conditions under which these values remain the same? Calculate Profit, Marginal cost and change in Profit. What output quantity of milk maximizes profit for Farm Fresh Diary? iii. Graph MC and MR curves of Farm fresh Diary. What are the rules of Profit Maximization suggested by this graph? Suppose a tax of Rs.20 is imposed and government fixes price of milk at Rs.80 a liter. Then what should be strategy of Farm Fresh Diary?arrow_forwardComplete the following table and identify the profit-maximizing output. What is true about marginal revenue and marginal costs when profit is maximized?What would be the profit-maximizing level of output if price fell to $9?arrow_forward
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