Question

Question 1

Output	total cost	marginal cost	fixed cost	average cost	Total revenue	average revenue	Marginal revenue
0	10				0
1	16				20
2	26				40
3	40				60
4	60				80
5	88				100
6	120				120

A) Complete the missing data on the table

B) What is the selling price of a laptop case explain your answer

c) What is the profit maximizing level of output for this firm explain your answer

d) create a graph using three columns of data on the table to illustrate the profit maximizing level of output. insert a graph in your Microsoft word study exercise document for submission do not submit a separate file for the graph

Answer 1

Output	price	TC	MC	TFC	AC	TR	AR	MR	profit = TR-TC
0	20	10	-	10	-	0	-	-	-10
1	20	16	6	10	16	20	20	20	4
2	20	26	10	10	13	40	20	20	14
3	20	40	14	10	13.3	60	20	20	20
4	20	60	20	10	15	80	20	20	20
5	20	88	28	10	17.6	100	20	20	12
6	20	120	32	10	20	120	20	20	0

MC = TCn - TCn-1

TFC is constant at every level of output.

AC = AC/Units

TR = Price x Quantity

AR = price

MR = TRn - TRn-1

B. The selling price of the laptop is 20. This is the case of perfect competition. imperfect competition price of the commodity is decided by demand and supply forces. Price remain constant at every level of output. Also price is equal to average revenue and the marginal revenue of the firm.

P = AR = MR

C. Condition for profit maximizing

As per MR and MC approach:

The producer will be at equilibrium where:

* MR = MC at 4 unit.

* Also after this level of output MC > MR( marginal cost is more than marginal revenue)

As per TR and TC approach

The producer will be maximizes profit at 4 unit as::

* The difference between TR and TC is Maximum ( profit = TR-TC)

* After this level profit falls.

Therefore the profit maximizing level of output is 4th unit.

D.