Documente Academic
Documente Profesional
Documente Cultură
Total
Output/h
r
0
1
2
3
4
5
6
7
8
9
10
11
Total
fixed
Cost
(TFC)
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
$10
Total
Variable
Total
Cost
Cost
(TVC)
(TC)
$0
$10
7
$17
10
$20
12
$22
13
$23
15
$25
18
$28
22
$32
27
$37
33
$43
40
$50
48
$58
Total C
18
$70
16
$60
14
Production cost
$50
12
10
Dollar cost
$30
$20
$10
2
0
$40
$0
1 2 3 4 5 6 7 8 9 10
0 1 2 3 4
Output
Profit Maximization
$70
$60
$50
$40
revenue and cost
Mea
$30
$20
1
Total Cost
Total Revenue
(TC)
$70
$60
$50
$40
revenue and cost
Total Cost
$30
(TC)
Total Revenue
$20
$10
$0
Output
1. Explain in your own words why MC=MR is a profit maximizing production level ?
Because if mc is greater than mr, a firm has spent more capital to get just a little mor
wise to break even.
2. Assume prices dropped to $4.25. What then would be the profit maximizing or loss
of production ?
loss minimizing level of production
3. Should the firm continue to operate at this point?
Yes they need to put more hours of output!
ollar cost
Market
Price
Perfect
Competit
Total
ion
Revenue
$5
$0
$5
$5
$5
$10
$5
$15
$5
$20
$5
$25
$5
$30
$5
$35
$5
$40
$5
$45
$5
$50
$5
$55
Total
Profit
($10)
($12)
($10)
($7)
($3)
$0
$2
$3
$3
$2
$0
($3)
Marginal
Revenue
(MR)
5
5
5
5
5
5
5
5
5
5
5
5
Maximum Profit at
Profit Maximizing
Output
MC=MR
$30
Total Cost
(TC)
$20
$10
$0
0 1 2 3 4 5 6 7 8 9 10 11
output
18
16
14
12
10
8
6
18
16
14
12
Average Total Cost (ATC)
10
6
4
2
0
Output
Total
Costs
(TC)
10.00
14.00
17.50
20.75
23.80
26.70
29.50
32.25
35.10
38.30
42.70
48.70
57.70
Total
Profit
(TP)
-10.00
-6.20
-2.30
1.45
5.00
8.30
11.30
13.95
16.10
17.50
17.30
15.10
9.50
Average
Total
Marginal Marginal
Cost
Cost
Revenue
(ATC)
(MC)
(MR)
0.00
14.00
4.00
7.40
8.75
3.50
7.00
6.92
3.25
6.60
5.95
3.05
6.20
5.34
2.90
5.80
4.92
2.80
5.40
4.61
2.75
5.00
4.39
2.85
4.60
4.26
3.20
4.20
4.27
4.40
3.80
4.43
6.00
3.40
4.81
9.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Output
Revenue-Cost Comparison
80.00
70.00
60.00
50.00
40.00
Total Revenue
30.00
20.00
10.00
(TR)
80.00
70.00
60.00
50.00
40.00
Total Revenue
30.00
20.00
10.00
0.00
Output
(TR)
DEMAND PRICE
Unit (Demand)
Cost (MC)
Revenue (MR)
MC=MR
AVERAGE TOTAL
COSTS