Question

11 of 50 (9 This Test: 50 pts possib profits is $1,200 per wook. lis weekly output is 400 units, and at this output rate, the frm's marginal cost is $32 per unit. The price at which it sells each unit is 44 per unit. t these profit and output rates, the firm's average total cost is $(Enter your response as a whole numbor.) t these profit and output rates, the ms

Answer 1

1) At the given profit and output rates the Total average cost of the firm is $41.

Explanation: The question even gives that the price of the product sold is $44 and at that cost, the firm is selling 400 units of product. From the given information we can calculate total revenue which is Quantity sold x Price of the product = 400 x $44 = $17,600.

Further, we can calculate total cost from the above-calculated value which is Total cost = Total revenue - Profit (Profit is the value we get after subtracting the total cost from total revenue, we can work on the formula). Total cost = $17,600 - $1,200 = $ 16,400.

Average cost = Total cost / Total quantity sold

= $16,400 / 400

= $41.

2) For profit maximisation, a monopoly tries to match its marginal cost with marginal revenue. In the question above its given that the marginal cost of the monopoly firm is $32. So the marginal revenue will also be $32.