Using the table: Revenue and Cost for a Perfectly Competitive Firm. What is the Quantity that maximizes profit? Select

Question

Using the table: Revenue and Cost for a Perfectly Competitive Firm. What is the Quantity that maximizes profit? Select one: a. 0 b. 8 c. 10 d. 9 Revenue and Cost for a Perfectly Competitive Firm P Q TR MR TC MC Profit 50 0 20 50 1 50 32 50 2 50 48 50 3 50 68 50 4 50 92 50 5 50 120 50 6 50 152 50 7 50 188 50 8 50 228 50 9 50 270 50 10 50 320 50 11 50 372 50 12 50 428 50 13 50 488

Help In Homework · Accepted Answer

c. 10 units Reason: A firm seeks to maximise its profit at the level where the MR = MC.In a perfectly competitive market, the firm will produce the level of output where the equality between MR and MC is attained where, TR = Price * units of output MR = TRn- TRn-1, where n depicts the number of units MC= TCn - TCn-1 Profit = TR-TC If we compute the values based on the above formulas, we see that, at 10 units of output, the MR = MC. At this level, the total revenue = $500, while the total cost = $320, which makes the total profit = $180. Hence we see that the firm will maximise its profit by producing 10 units of output.

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Using the table: Revenue and Cost for a Perfectly Competitive Firm

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Archived Solution

P	Q	MR	TC
50	0		20
50	1	50	32
50	2	50	48
50	3	50	68
50	4	50	92
50	5	50	120
50	6	50	152
50	7	50	188
50	8	50	228
50	9	50	270
50	10	50	320
50	11	50	372
50	12	50	428
50	13	50	488

P	Q	MR	TC
50	0		20
50	1	50	32
50	2	50	48
50	3	50	68
50	4	50	92
50	5	50	120
50	6	50	152
50	7	50	188
50	8	50	228
50	9	50	270
50	10	50	320
50	11	50	372
50	12	50	428
50	13	50	488