Answer to Question #257156 in Microeconomics for ten

Question

The following data of mixed cost of variable cost are from the firm based in a perfectly competitive market. The market price for the firms’s product is $600.

 

output FC VC TC                                       TR PROFIT /LOSS

0 $400 $0

  1 $400 $400

2 $400 $720

3 $400 $1200

4 $400 $1760

  5 $400 $2400

6 $400 $3120

 

a.      Examine information given in the above table and complete this table

b.      Demonstrate the rate at which the firm is maximizing the profit or minimizing the loss?

c.      Calculate the average revenue and marginal revenue at each level of output?

d.      What can you say about the relationship between marginal revenue and marginal cost at profit maximization level of output.

Answer 1

(a)

(b)

The firm maximizes profit at output =4. At this point the marginal cost is almost equal to the marginal revenue as shown in the table above.

(c)

Average revenue and marginal revenue have been computed in the table above.

(d)

At the profit maximization level of output, marginal revenue is usually equal to marginal cost.

In this case, at the profit maximization level of output, marginal cost is almost equal to the marginal revenue.