Question

Choco Lovers Costs and Revenue MC Quantity TC ATC (S) (S) (S) of Gift Boxes 5.75 5.00 20 115.00 5.50 25 137.50 5 42 5.00 30 6.00 35 192.50 8.00 232.50 5.81 40 282.50 6.28 10.00 45 Instructions: Enter your answers below as whole numbers. For profit and profit per unit, round your answers to 2 decimal places. Include a negative sign if necessary Profit-maximizing price Profit-maximizing quantity 8 Total revenue Profit = Profit per unit =

Answer 1

Q	TC($)	ATC($)=TC/Q	MC($)=∆TV/∆Q
20	115.00	5.75	5.00
25	137.50	5.50	4.50
30	162.60 [i.e., 5.42 * 30]	5.42	5.00 [i.e., (137.50-115.00) * (30-25)]
35	192.50	5.50 [i.e., 192.50 / 35]	6.00
40	232.50	5.81	8.00
45	282.50	6.28	10.00

Profit maximizing price = $8

Profit maximizing quantity = 40    

Explanation:

The profit maximization condition is P = MC. From the table, it is seen that P = MC = $8 at the quantity of 40. Profit maximizing quantity is 40.

Total revenue = P * Q = $8 * 40 = $320

Profit = TR - TC = 320 - 232.50 = $87.50

Profit per unit = 87.50 / 40 = $2.19