Question

from the above data

А в M Q: Units Produced TC:Total Cost TFC: Total F ixed Cost TVC: | Total Variable Cost AFC: AVC: ATC: Average Average Average Fixed Variable Total Cost Cost Cost SMC : Short run Marginal Cost AP: TR: Total MR: Marginal TP: Total Average Revenue Revenue Profit Profit MP: Profit Margin TC/Q Logical Formula *Change in TC/ *$300*Q TVC TFC/ Q TVC/Q or Excel Formula for 200 units > C8/A8 D8/A8 or NA 60.0 100 200 300 400 500 600 6000 12000 15000 21000 33000 48000 65000 83000 102000 123000 158000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 9000 15000 27000 42000 59000 77000 96000 117000 152000 Infinity 60.0 30.0 20.0 15.0 12.0 10.0 60.0 45.0 50.0 67.5 84.0 98.3 110.0 120.0 130.0 152.0 *Change in TP/ *Change in TR/ TR-TC Change in Q ΤΡ/α AFC+AVC Change in Q Change in a MR-MC B8/A8 (K8-K7)/(A8-A7) or (B8-B7)/(A8-A7) A8*300 (18-17)/(A8-A7) 18-38 K8/A8 E8+F8 J8-H8 Infinity NA NA -6000 Infinity 120.0 30000 300.00 18000 180.0 240.0 75.0 30.0 60000 300.0 45000 225.0 270.0 70.0 60.0 90000 300.00 69000 230.0 240.0 82.5 120.0 120000 300.0 87000 217.5 180.0 96.0 150.0 150000 300.0 102000 204.0 150.0 108.3 170.0 180000 300.00 115000 191.7 130.0 118.6 180.0 210000 300.0 127000 181.4 120.0 127.5 190.0 240000 300.00 138000 172.5 110.0 136.7 210.00 270000 300.0 147000 163.3 90.0 158.0 350.00 300000 300.0 142000 142.0 -50.00 700 8.6 7.5 800 900 1000 6.7 6.0

What level of output should the manager of Redstone choose to produce? Explain your choice in at least 100 words.

Answer 1

Manager of Redstone, should consider an output level where marginal revenue should equal marginal cost. In the given scenario, the output level to be produced = 900 units. Because, after this level of output, marginal cost is going to be bigger than the marginal revenue. It means that profit level decreases if more than 900 units are produced. So, on the basis of marginal principle, the profit maximizing output = 900 units

At this level of output,

Total cost = $123000

Total revenue = $270000

So,

Net profit = 270000 - 123000

Net profit = $147000

Here, the profit of $147000 is maximum for all the output level. Hence, the profit maximizing output = 900 units.