Question

3. Price is $45. Using the information provided in the table answer the following questions. a) determine the firm’s profit-maximizing level of production? b) determine how much profit the firm will earn? c) Is quantity a continuous or discrete variable? d) Is cost a continuous or discrete variable? e) Identify the set of possible values of quantity. f) Identify the set of possible values for TC.

Quantity	Total Cost
0	$12
1	$20
2	$36
3	$60
4	$92
5	$132
6	$180
7	$236

Answer 1

3.

Quantity	Total Cost	Marginal Cost
0	12
1	20	8
2	36	16
3	60	24
4	92	32
5	132	40
6	180	48
7	236	56

A.

Profit maximizing level of output = 5 units

Because, after this level of output, Marginal cost will be higher than the price of $45.

B.

Profit = total revenue - total cost

Profit = 5*45 - 132

Profit = $93

C.

Quantity is a discrete variable, because it can be counted and it cannot be in decimal figure like 5.4 units or 6.1 units. There will always be integer values to measure the quantity.

D.

Cost is a discrete variable, because it is countable. A cost of $2.50 means 2 dollars and 50 cents where cents are countable. Hence, cost is considered to be a discrete variable.

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