Question

9. Problems and Applications Q4

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

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

4

5

6

7

Answer 1

Quantity	Total cost	Marginal cost	Total revenue	Marginal revenue	profit
0	8	-	0	-	(TR - TC) -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

In order to maximise profits the firm produces 6 units of output.As it is here that we obtain equality between MR and MC and MC is at its rising portion.