Question

Marginal cost 14 Price = Marginal revenue Price or Cost(dollars per bushel) Quantity (bushels of fish per day)

Answer 1

1 (a). Profit maximization output is when MC (marginal cost) = MR (marginal revenue)

                So in graph MC = MR is the point when they intersect.

           Quantity at intersection is 4 bushels of fish per day and price is $13.This is equilibrium price and quantity.

      ANS : 4 bushels of fish per day

(b) profit or loss per bushel is the difference between price and Average cost for one bushel.Price is equilibrium price is, $13. Average cost(AC) = Total cost / total number of bushels.Total number of bushels is 5.Here we take average cost for output 4.because it is the equilibrium quantity.

     Total cost = 10 + 15 + 22 +31 + 44 = 122

           AC = 122 / 4 = 30.50

              So average cost is greater than price.It means there will be a loss.

         Profit for one bushel = price - AC = 13 - 30.50 = - $17.50 per bushel

(c) Total profit is , profit for one bushel multiplied by total quantity(equilibrium quantity).

           Total profit = - 17.5 * 4 = - $70

             Negative sign shows loss.