Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Consider the total cost and total revenue schedules of two firms: Gulp and Devour Shady Enterprise Output TC TR TC TR 1
Consider the total cost and total revenue schedules of two firms:
| Gulp and Devour | Shady Enterprise | |||
|---|---|---|---|---|
| Output | TC | TR | TC | TR |
| 1. | 100 | 135 | 50 | 160 |
| 2. | 200 | 260 | 125 | 300 |
| 3. | 300 | 375 | 225 | 420 |
| 4. | 400 | 480 | 350 | 520 |
| 5. | 500 | 575 | 500 | 600 |
| 6. | 600 | 660 | 675 | 660 |
| 7. | 700 | 735 | 875 | 700 |
| 8. | 800 | 800 | 1100 | 720 |
What is the profit-maximizing output in each case? Show that three criteria are equivalent: marginal cost equals marginal revenue, maximum profit, and marginal profit equals zero.
Expert Solution
Gulp and Devour
| Output | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| TC | 100 | 200 | 300 | 400 | 500 | 600 | 700 | 800 |
| TR | 135 | 260 | 375 | 480 | 575 | 660 | 735 | 800 |
| AC | 100 | 100 | 100 | 100 | 100 | 100 | 100 | 100 |
| MC | 0 | 100 | 100 | 100 | 100 | 100 | 100 | 100 |
| MR | 0 | 125 | 115 | 105 | 95 | 85 | 75 | 65 |
| AR | 135 | 130 | 125 | 120 | 115 | 110 | 105 | 100 |
| Profit | 35 | 60 | 75 | 80 | 75 | 60 | 35 | 0 |
| MP | 0 | 25 | 15 | 5 | -5 | -15 | -25 | -35 |
Shady Enterprise
| Output | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| TC | 50 | 125 | 225 | 350 | 500 | 675 | 875 | 1100 |
| TR | 160 | 300 | 420 | 520 | 600 | 660 | 700 | 720 |
| AC | 50 | 62.5 | 75 | 87.5 | 100 | 112.5 | 125 | 137.5 |
| MC | 0 | 75 | 100 | 125 | 150 | 175 | 200 | 225 |
| MR | 0 | 140 | 120 | 100 | 80 | 60 | 40 | 20 |
| AR | 160 | 150 | 140 | 130 | 120 | 110 | 100 | 90 |
| Profit | 110 | 175 | 195 | 170 | 100 | -15 | -175 | -380 |
| MP | 0 | 25 | 15 | 5 | -5 | -15 | -25 | -35 |
CONCLUSION
Profit is highest at 4 units for Gulp and Devour and 3 units for Shady Enterprise. At this output, the MR and MC are closest to each other as they are not equal at any of the output level.
Basic formulas
MarginalCost(MC)=ΔTCΔOutputAverageCost(AC)=TCOutputMarginalRevenue(MR)=ΔTRΔOutputMarginalCost(MC)=ΔTCΔOutputAverageCost(AC)=TCOutputMarginalRevenue(MR)=ΔTRΔOutput
AverageRevenue(AR)=TROutputProfit=TR−TCMarginalProfit(MP)=ΔProfitΔOutput
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
