Question

Chap 11 Practice: Costs, Profits and Profit Maximization Price Number of wortes given Total dudon Q Total Revenue PQ War Revenue IMQ Tal Fed Costs TEC Tetable Cost TVC Total Costs TVC Au Varble Cont TV Are Maria Cost Coast 1000 1000 given C TC-TR 0 $80 1801 2 803 330 320 320 6 $ 0 $300 0 5300 N 2 3160 $80 3199 $150 $450 $ 3 525 $ $2.10 5 Shop 12033005300 6602 $60.120.50 $200 9 7200...300 $450 750 5.50 $633 555 $30 125.960 .60 $100 $600 9800450$$50 - $60 131,200 $300 $750 OD 981975*75-570 15 3000 5300 900 $1200 $60 580 150 $o 5 To Do: 1. Complete the table of data for a single firm in a competitive market above. You will need formulas found in the chapter/online along with the following information: Two buildings (capital) rent for $300 for both (not each!). Employment of workers varies with production. Regardless of how many workers are employed, each worker is paid $150. Finally, the market sets the price of the widgets, which is currently at 580. 2. When you have finished, you should know the following: Demand (D), Price (P). Quantity (Q), Total Cost (TC), Marginal Cost (MC), Total Revenue (TR), Marginal Revenue (MR), Total Profit (TP) and Average Cost (AC), Average Variable Cost (AVC) for this firm. Dona l d ADD DDY 3. Required: Using your completed table, fill in the blanks in the following paragraph: (note: some values may be used more than once) a. Assume that the perfectly competitive widget maker above wishes to maximize profit. Based on the table above, to reach maximum profit you advise him to bi produce 15 quantity and charge $80 price? b. The owner of the firm asks you what rule(s) you followed to get profit maximizing quantity named above. You tell the owner you learned in econ class that profit is maximized when the quantity meets either of the following rules P MC or MR-MC (use letters: NOT numbers) c. She then asks you what the REVENUE will be at the profit maximizing quantity of_ and how you calculated it. You tell her that the total revenue equal to dollars. And you got it by multiplying (use words, NOT numbers)

Answer 1

No. of workers	Profit= TR-TC
0	0
1	160-450=-290
2	400-600=-200
3	720-750=-30
4	960-900=60
5	1120-1050=70
6	1200-1200=0

Profit column is wrongly calculated in your answer. Rest is correct.

Answer 3. a. Quantity = 14, price= $80

reason- When Q=14, Profit is maximum at $70. P=80 amd MC=75 and Beyond this point MC rises, so this is profit maximising point

b. P=MC, MC=MR

reason- Under perfect competition, P=MR=MC is the profit maximising condition

c. Profit maximising quantity=14.

Total revenue=$1120.

You got it by multiplying PRICE* QUANTITY

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