Question

20. Consider the following table. The firm has to pay $6 for wi-fi regardless of output. Q is quantity. P is price. FC is fixed cost. VC is variable cost. TC is total cost. MC is marginal cost. MR is marginal revenue. i. Fill in the spots that have letters. ii. What is the optimal quantity? Note: Your solution should be the smaller of the two quantities you're considering. You want to think of the solution as the value such that the property we discussed holds, and it's *IF you added one more unit* as opposed to already having added one more unit. VC 1 1 FC A A A QP 30 2 21 3 16 4 5 11 MC MR G K H L TC B С D E 13 15 17 18 I M N co J A A F

Answer 1

A= $6

B= $6+$1=$7

C= $6+$13=$19

D= $6+$15=$21

E=$6+$17= $23

F=$6+$18=$24

G= $1-$0=$1

H=$13-$1=$12

I=$15-$13=$2

J=$17-$15=$2

K=$30

L=$42-$30=$12

M=$48-$42=$6

N=$52-$48=$6

Optimal quantity is where MR=MC.

MR=MC = $12 when Q= 2.

Reason- FC is the cost which is there irrespective of the quantity. So FC=$6.

TC=TVC+TFC

MCn=TCn-TCn-1

TR=P*Q

MRn=TRn-TRn-1