Question

In the final column, enter profit for each quantity. (Note: If the firm suffers a loss, enter a negative number in the appropriate cell.) 

In order to maximize profit, how many units should the firm produce? Check all that apply.

• 4

• 5

• 6

• 7

In the previous table, enter marginal revenue and marginal cost for each quantity.

On the following graph, use the green points (triangle symbol) to graph the marginal-revenue curve, then use the orange points (square symbol) to plot the marginal-cost curve. (Note: Be sure to plot from left to right and to plot between integers. For example, if the marginal cost of increasing production from 1 unit to 2 units is $5, then you would plot a point at (1.5, 5).) 

The marginal-revenue curve and the marginal-cost curve cross at a quantity  _______ . 

This firm _______  in a competitive industry, because marginal revenue is _______ as quantity increases. Also, the industry _______  in a long-run equilibrium.

Answer 1

Answer:

Quantity	Total Cost(TC)	Marginal Cost (MC)= ΔTC / ΔQ	Total Revenue(TR)	Marginal Revenue(MR) = ΔTR / ΔQ	Profit = TR - TC
0	8	-	0	-	-8
1	9	1	8	8	-1
2	10	1	16	8	6
3	11	1	24	8	13
4	13	2	32	8	19
5	19	6	40	8	21
6	27	8	48	8	21
7	37	10	56	8	19

To maximize profit firm should produce 6 units

To maximize profit, firm produce quantity where MR is greater than or equal to MC. As shown in the table, MR = MC = 8 at quantity of 6 units. Also, at 5 units of output, firm maximize profits and MR > MC. Profits are maximum (21) when firm produce 5 and 6 units of output.

Hence, correct answers are 5 and 6 units

In the above graph, MR and MC curves shown.

The marginal revenue and marginal cost curve cross between 5 and 6 units.

The firm is in a competitive industry, because marginal revenue is constant as quantity increases. Also, the industry is not in a long-run equilibrium. |