Question

You are operating a firm in a perfectly competitive market. In the short run, you have fixed costs of $30. Your variable costs are given in the following table:

Q	TVC
0	0
1	100
2	150
3	180
4	220
5	300
6	390

Complete the following table:

Market Price	Profit maximizing level of output	Profit
$48
$60
$75
$85

Answer 1

Ans:

The profit maximizing level of output is where marginal revenue is above or equal to marginal cost.

profit = total revenue - total cost

marginal cost = change in total cost / change in quantity

calculation of marginal cost

Quantity	Total variable cost	Fixed cost	Total cost	Marginal cost
0	0	$30	$30	0
1	$100	$30	$130	$100
2	$150	$30	$180	$50
3	$180	$30	$210	$30
4	$220	$30	$250	$40
5	$300	$30	$330	$80
6	$390	$30	$420	$90

Table showing profit maximizing level of output and profit

Market price	Profit maximizing level of output	Total revenue- Total cost = Profit
$48	4	$192 - $250 = -$58
$60	4	$240 - $250 = -$10
$75	4	$300 - $250 = $50
$85	5	$425 - $330 = $95