Answer to Question #118770 in Economics for urooj

Question

Q. 3
Prevailing market price is 4 USD. Firm's total cost and output is given in the following:

Output = 0, 10, 20, 30, 40, 50, 60, 65, 70, 75, 80, 85, 90

Total cost = 65, 100, 130, 150, 160, 170, 185, 196, 210, 227, 250, 290, 360

A. Determine the output and dollar amount at which the firm maximizes total profits?
B. At what levels of output does the firm break even? (Plot the curves and show graphically with help of total and marginal analysis).
C. Determine the output and dollar amount at which the firm maximizes average profits?

Answer 1

Q = 0, 10, 20, 30, 40, 50, 60, 65, 70, 75, 80, 85, 90

TC = 65, 100, 130, 150, 160, 170, 185, 196, 210, 227, 250, 290, 360

MC = - , 3.5, 3, 2, 1, 1, 1.5, 2.2, 2.8, 3.4, 4.6, 8, 14.

A. The output and dollar amount at which the firm maximizes total profits is where MR = MC, so Q = 75 and TP = 4×75 - 227 = 73.

B. The firm break even if P = ATC, it is true if Q = 40.

C. The output and dollar amount at which the firm maximizes average profits is the same as in A.