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consider total cost and total revenue given in the table bellow:

quantity total cost total revenue
0 $8 0
1 $9 8
2 $10 16
3 $11 24
4 $13 32
5 $19 40
6 $27 48
7 $37 56
a. Calculate profit for each quantity. How much should the firm produce to maximize profit?
b. Calculate marginal revenue and marginal cost for each quantity. Graph them. (Hint: Put the points between whole numbers. For example, the marginal cost between 2 and 3 should be graphed at 2 1/2.)
At what quantity do these curves cross? How does this relate to your answer to part (a)?
c. Can you tell whether this firm is in a competitive industry? If so, can you tell whether the industry is in a long-run equilibrium?

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sara
2 answers

  1. please i need your help ^_^

    quantity 0 1 2 3 4 5 6 7
    total cost 8 9 10 11 13 19 27 37
    total revenue 0 8 16 24 32 40 48 56

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    sara

  2. An Excel spreadsheet is very helpful for these kinds of problems.

    Always always always, maximize where MC=MR.
    So calculate marginal cost and marginal revenue schedules. Going from 0 to 1 unit, costs went from 8 to 9, so MC here is 1. (Take the hint and MC at 1/2 is 1). Going from 0 to 1 unit, total revenues went from 0 to 8, so TR is 8.
    Repeat for the remaining units of production -- find where MC=MR.

    c) Since MR is constant, the firm must be in a competitive industry. I don't think there is enough info to determine whether the industry in in a long-run equilibrium

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    economyst

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