Question

Andrea’s Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following questions accordingly (Q15-Q18).
Price Quantity TC
$25.00 0 $100
$24.00 10 $250
$23.00 20 $420
$22.00 30 $600
$21.00 40 $780
$20.00 50 $970
$19.00 60 $1,170

15) Total fixed costs in the above table is:
A) Zero
B) $130
C) $100
D) $10

16) Total Revenue of producing 30 units of output is:
A) $435
B) $660
C) $600
D) $180

17) In order to maximize profit, the above firm should produce where:
A) Price = Marginal cost
B) Price = Average Total Cost
C) Marginal Revenue = Marginal Cost
D) Profit is zero.

18) The profit maximization price in the above table is:
A) $24
B) $21
C) $22
D) $25

Answer 1

Totd (TR) IMR- ATRAC ME- AT revenue 25 24 23 460 प 20 420 20 600 660 780 gro 970 Ilo0o GO T40 1140 21 Yo 18 18 T 19 16 19 20 (15 Fixed costs = To CQ=0) = 11oo & . (c) is correct To Told revenue (Q= 30) = PQ 3 - 22 (32) = 660l ® is correct 1 Bofit is maximized where Margind revenue (MR) el to Morgund cost (MC) O MR=MG (c is correct. correct. 10 MC= At MR-ME = 18 ® is correct