Question

MC ATC AVC ------- ------- ------- 1 'If the market price is $82, how much will the firm produce to maximize profit? What is the profit? $50 $150 $50 40 95.00 45.00 30 73.33 40.00 40 65.00 40.00 50 62.00 42.00 60 61.67 45.00 70 62.86 48.57 80 65.00 52.50 90 67.78 56.67 100 71.00 61.00 Click in the profit 8

Answer 1

Total Cost (TC) = ATC x Q

Total Revenue (TR) = Market price x Q

Economic Profit (EP) = TR-TC

When market price is $82

ATC TC TR 0 0 0 1 150 150 2 95 190 73.33 219.99 65 260 5 62 310 61.67 370.02 7 62.86 440.02 8 65 520 67.68 609.12 10 71 710 E P 0 82 164 246 328 410 492 574 656 738 820 0 -68 -26 26.01 68 100 121.98 133.98 136 128.88 110 9

The firm will choose to produce 8 units at it maximizes profit . Profit is 136

When market price is $52

Ovo AWNO 260 ATC TC TR 0 0 0 1 150 150 2 95 190 73.33 219.99 65 310 61.67 370.02 62.86 440.02 8 65 520 9 67.68 609.12 10 71 710 E P 0 0 52 -98 104 -86 156 -63.99 208 -52 260 -50 312 -58.02 364 -76.02 416 -104 468 -141.12 520 -190 62

The firm will choose to produce 5 units at it reduces loss . Profit is -50 . ( note : the firm may not choose to produce at all if that option is available)

When market price is $38

Q ATC TCTREP 0 0 0 0 0 150 150 38 -112 95 190 76 -114 73.33 219.99 114 -105.99 65 260 152 -108 62 310 190 -120 6 61.67 370.02 228 -142.02 62.86 440.02 266 -174.02 65 520 304 -216 67.68 609.12 342 -267.12 10 71 710 380 330

The firm will choose to produce 4 units at it reduces loss . Profit is -108 . ( note : the firm may not choose to produce at all if that option is available)

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