Question

for question 2 use the information in picture 2 and use as much deatil as possible.

2) With "generic" graphs, illustrate the profit maximizing quantity, price, and ATC from the solution in #1. Make sure to draw an ATC, AVC, MC, and MR curve.

Answer 1

Profit maximizing quantity is where MC=MR
if MC>MR, profits reduce; if MC<MR, profit increases
Therefore at quantity=5, profit is maximized

0.0 1.0 3.0 7.0 8.0 2.0 - AVC 4.0 5.0 ATC +MC 6.0 +MR

Price = 3, ATC = 2.3