Question

Need help with B and C at the bottom. Thanks

2. a. Fill out the following table (skipping the last two columns for now) Average Total Total Profit Variable Cost Total Cost Marginal Cost Average Fixed Average Fixed Cost Units of Output Revenue Cost Variable Cost Cost 0 -100 125 25 as -65 SO loo 25 725 53.3 25 .25 4425 | 20 120,4 | 40,4 0 7 2267 39.3 145 157 20 333 117 20 57 2o 4 66 llo2 1202 | 2363 /7 270 226 326 398 340 490 Co.75 331 44.2 72 3 9 i O 10 b. If the market price is $60, what is the profit-maximizing output according the table above (without completing the last two columns). c. Completing the last two columns and verify your answer in part b

Answer 1

(a)

Q	FC	VC	TC	MC=Change in TC	AFC=FC/Q	AVC=VC/Q	ATC=TC/Q	TR=P(Q)	Profit =TR-TC
0	100	0	100	-	-	-	-	0	-100
1	100	25	125	25	100	25	125	60	-65
2	100	45	145	20	50	22.5	72.5	120	-25
3	100	57	157	12	33.33	19	52.3	180	23
4	100	77	177	20	25	19.25	44.25	240	63
5	100	102	202	25	20	20.4	40.4	300	98
6	100	136	236	34	16.67	22.67	39.3	360	124
7	100	170	270	34	14.3	24.3	38.6	420	150
8	100	226	326	56	12.5	28.25	40.75	480	154
9	100	298	398	72	11.1	33.1	44.2	540	142
10	100	390	490	92	10	39	49	600	110

(b) Profit maximizing output is when P=MC.

When P=$60, we can see that at Q=8 units, P>MC and at Q=9 units ,P<MC.

Therefore , if P=$60 , the profit maximizing output is 8 units.

(c) After completing the last two columns ,we can see that at Q=8 units , profit is at its maximum i.e $154.