The table below shows the short-run production and cost schedule of a blueberry farm that operates...

The table below shows the short-run production and cost schedule of a blueberry farm that operates in a perfectly competitive market. Suppose that the prevailing market price is $4 per pack.

Quantity	Total Cost
0	$80
10	$112
20	$132
30	$148
40	$166
50	$188
60	$214
70	$246
80	$286
90	$346
100	$426

(a) What is the fixed cost?

(b) What is the marginal revenue?

(d) Suppose that the farm produces 50 packs of blueberry. What is the farm's profit?

(e) Find the profit-maximizing quantity and obtain the maximum profit.

Solutions

Expert Solution

Fixed cost does not vary with the change in the output.

VC=TC-FC

ATC=TC/Q

AVC=TVC/Q

MC=TCn-TCn-1

TC=TFC+TVC

Fixed cost=$80

MR will be equal to price and so MR is $4.

Marginal cost is the addition in total variable cost due to producing an extra unit of output. It means when an additional unit of output is produced and there is an addition in the total variable cost, then this additional cost is called marginal cost.

Hence when output increase from 60 units to 70 units, then MC is $3.

when farm produces 50 packs of blueberry,

TR=4*50

=200

TC=188

Profit=TR-TC

=200-188

=$12

profit-maximizing condition of perfectly competitive firm is

P=MC

Corresponding to this condition quantity is $80 units and profit is $34.

Rahul Sunny answered 1 year ago

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