5. Consider total cost and total revenue given in the following table:
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 2/½.)
c. At what quantity do the curves in part b cross? How does this relate to your answer to part a.?
d. Can you tell whether this firm is in a competitive industry?
e. Is the industry in long-run equilibrium?
Q | TC | TR | MC | MR | PROFIT |
0 | 24 | 0 | -24 | ||
0.5 | 3 | 24 | |||
1 | 27 | 24 | -3 | ||
1.5 | 3 | 24 | |||
2 | 30 | 48 | 18 | ||
2.5 | 3 | 24 | |||
3 | 33 | 72 | 39 | ||
3.5 | 6 | 24 | |||
4 | 39 | 96 | 57 | ||
4.5 | 21 | 24 | |||
5 | 60 | 120 | 60 | ||
5.5 | 27 | 24 | |||
6 | 87 | 144 | 57 | ||
6.5 | 32 | 24 | |||
7 | 119 | 168 | 49 |
a) Profit = TR-TC
The firm will set MC=MR for profit maximization and should produce 5 units to maximize profits
b) MR = change in TR/change in Q
MC = change in TC/change in Q
c) They intersect each other at Q=5 units as found out in part a
d) This firm is in a competitive industry as the MR is constant
e) No, because in the long run the profits are zero whereas this industry is having positive economic profits.
5. Consider total cost and total revenue given in the following table:
. Consider total cost and total revenue given in the table below:QUANTITY 0 1 2 3 4 5 6 7Total cost $8 $9 $10 $11 $13 $19 $27 $37Total revenue 0 8 16 24 32 40 48 56a. 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...
Consider total cost and total revenue, given in the following table: In the final column, enter profit for each quantity. (Note: If the firm suffers a loss, enter a negative number in the appropriate cell.) Quantity Total Cost Marginal Cost Total Revenue Marginal Revenue Profit (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) 0 6 0 1 8 7 2 10 14 3 13 21 4 17 28 5 24 35 6 32 42 7 42 49 In order to maximize profit, how...
3. Problems and Applications Q3 Consider total cost and total revenue, given in the following table: We were unable to transcribe this image10 T Marginal Revenue Marginal Cost Quantity of 6 units The marginal-revenue curve and the marginal-cost curve cross at a quantity , as quantity increases. in a competitive industry, because marginal revenue is This firm is not True or False: The industry is in a long-run equilibrium True O False
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