Question

2. A. Fill in the table below. AC Quantity Total Cost Total Profit PPU TR $20 B. If this industry only has one firm, what is the profit maximizing price and quantity? C. Roughly sketch a graph of this firm's market, including MR, MC and AC curves. D. Add an appropriate demand curve for this firm to your graph At the profit maximizing price and quantity, shade in the area of the graph indicating the firm's profit.

Answer 1

Qty	Price	TC	TR	MR	MC	AC	Profit
10	10	20	100	nil	nil	2	80
20	8	50	160	6	3	2.5	110
30	6	70	180	2	2	2.33	110
40	4	90	160	-2	2	2.25	70
50	2	120	100	-6	3	2.4	-20

TR = P * Q

MR =

ATRAQ

MC =

ДтсдQ

PRofit = TR - TC

AC = TC/Q

b. Profit maximising level of output is attained at a point where the marginal revenue equals the marginal cost. This occurs at 30 units of output at a price of $6.

c.

MR, MC, AC, PRICE 10 20 30 30 40 50 50 60 Quantity Qty MR MC AC

d.

MR, MC, AC, PRICE 10 20 30 50 60 Quantity Qty MR MC AC