Question

Refer to the information provided in Table 8.5 below to answer the following questions. Table 8.5 Number of Fruit Baskets 60 10 TFC TVC TCMC $50 SO 50 10 50 15 655 50 21716 8110 96 15 68 118 22 16) Refer to Table 8.5. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $22. To maximize profits, Exotic Fruit should sell_ fruit baskets and their profit is A) three; S5 B) four; $7 C) five; $14 D) six: $14 Answer: D 17) Refer to Table 8.5. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $15. To maximize profits, Exotic Fruit should sell baskets and their profit is A) zero; SO B) two; -$35 C) three; -$26 D) five; -$21 Answer: D fruit 18) If a firm's demand curve is perfectly elastic, then at the profit maximizing level of output A) P = MR = MC. B) P> MR > MC. C) PMR<MC. D) P >0 and MR = 0. Answer: A 19) If a profit maximizing firm is currently producing where MR = MC, it should A) increase output so that marginal revenue is less than marginal cost. B) decrease output so that marginal revenue will be greater than marginal cost and the firm's profit will increase. C) not change because it is already maximizing profit. D) exit the industry Answer: C

Answer 1

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	Present	Proposed
Sales	1,620,000	1,692,000
Variable expenses	324,000	470,000
Contribution margin	1,296,000	1,222,000
Fixed expenses	1,044,000	934,000
Net operating income	252000	288,000
Change in net operating income = 288000-252000=			36000 increase