Question

VWX.Clinic offers a dentistry treatment. You are the manager, the owner asks you how much to charge to maximize profits. The demand curve for the treatments and their total costs are given in table 1. a. For each level of output, calculate total revenue, marginal revenue, average cost, and marginal cost. b. What is the profit-maximizing level of output for the treatments and how much will the firm earn in profits?

Table 1

Quantity	Price	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Average Cost
0	431250			6375000
20	375000			7500000
30	337500			9000000
40	300000			10875000
50	262500			13125000
60	225000			15750000
70	187500			19125000
80	150000			24000000

Answer 1

Quantity	Price	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Average Cost	Profit
0	431250	0		6375000			-6375000
20	375000	7500000	375000	7500000	56250	375000.00	0
30	337500	10125000	262500	9000000	150000	300000.00	1125000
40	300000	12000000	187500	10875000	187500	271875.00	1125000
50	262500	13125000	112500	13125000	225000	262500.00	0
60	225000	13500000	37500	15750000	262500	262500.00	-2250000
70	187500	13125000	-37500	19125000	337500	273214.29	-6000000
80	150000	12000000	-112500	24000000	487500	300000.00	-12000000

a. Total Revenue (Quantity*Price), Marginal Revenue (Change in total revenue/change in quantity), and Marginal Cost (Change in total cost/Change in Quantity), Average cost (Total cost/Quantity) are shown in the table above

b. Profit gets maximised where MC=MR and it is at quantity 40 and profit is $ 11,25,000