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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

According to the accompanying table, what quantity of output should the firm produce? Explain your answer.

images

To determine

Quantity of output produced by the firm.

Explanation

Table 1 shows the different quantities of output produced at different total revenues and total costs.

Table 1

QuantityTotal revenueTotal cost
0$0$0
110050
2200110
3300180
4400260
5500360
6600480

From the different quantitates shown in Table 1, the firm should produce 5 units of output because the total revenue is greater than the total cost, and also at quantity 5, the marginal revenue is equal to the marginal cost. The calculation of marginal revenue and marginal cost is shown below:

 Marginal revenue can be calculated as follows:

 Marginal revenue=Total revenuePresentTotal revenuePreviousQuantityPresentQuantityPrevious        (1)

 Substitute the respective values in Equation (1) to calculate the marginal revenue at quantity 5 units

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