Question

Table 8.7 Number of Fruit BasketsTFC $50 50 50 50 50 TVC $0 10 15 1 21 31 ao A WNAO TC $50 60 65 71 10 5 81 96 118 50 68 22

Refer to the table above. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $22. To maximize profits, Exotic Fruit should sell ______________ fruit baskets and their profit is ___________________.

Group of answer choices

a) three; $5

b) four; $7

c) five; $14

d) six; $14

Answer 1

Ans) In competitive market, Price is equal to Marginal revenue.

A profit maximising point is where MC = MR

Here, P= $22

And at quantity of 6 fruit basket, MC = 22

So, firm should sell 6 fruit basket to maximise profit.

Revenue = quantity × price = 6 × $22 = $132

Profit = total revenue - total cost = $132 - $118 = $14

Option d