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Homework answers / question archive / Suppose there is only one supplier in the market of product X
Suppose there is only one supplier in the market of product X. The following table shows partial information of product X and the supplier's cost. Price Quantity Marginal Cost Demanded $1,600 1 550 1.300 600 1,200 1,100 1,000 0 1,500 1,400 500 2 3 4 5 6 7 8 9 10 650 700 750 800 850 900 900 800 700 600 950 A. Determine the supplier's profit-maximizing output quantity. Explain your answer. (30 marks) B. At what price should the supplier charge to maximize its profit? Explain your answer. (10 marks) C. Suppose at the profit-maximizing output quantity you have determined in part A, the average variable cost is $600 and the average total cost is $800. Calculate the total profit at the profit- maximizing output quantity.
Quantity: 5 units
Explanation:
| P | Q | MC | TR | MR |
| 1600 | 0 | 0 | ||
| 1500 | 1 | 500 | 1500 | 1500 |
| 1400 | 2 | 550 | 2800 | 1300 |
| 1300 | 3 | 600 | 3900 | 1100 |
| 1200 | 4 | 650 | 4800 | 900 |
| 1100 | 5 | 700 | 5500 | 700 |
| 1000 | 6 | 750 | 6000 | 500 |
| 900 | 7 | 800 | 6300 | 300 |
| 800 | 8 | 850 | 6400 | 100 |
| 700 | 9 | 900 | 6300 | -100 |
| 600 | 10 | 950 | 6000 | -300 |
TR=P*Q
MR=change in TR/change in Q
firm maximizes its profit where MR=MC. here at quantity 5, MR=MC.
B.
$1100
Explanation:
firm maximizes its profit where MR=MC. at quantity , price is 1100.
c.
Profit=(price-ATC)*quantity
=(1100-800)*5
=1500
