Question

Consider the following table:

Price	Output	Total Cost
$200	0	$300
$180	1	$320
$160	2	$348
$140	3	$381
$120	4	$421
$100	5	$466

All answers should be a whole integer. DO NOT put a dollar sign.

The Average Fixed Cost of producing 4 units of output is _________

The Average Variable Cost of producing 2 units of output is ________

The Marginal Cost of the fourth unit of output is ________

The profit-maximizing quantity is _______

The amount of profit that the monopolist realizes is _______

Answer 1

1.

AFC for 4 units of output = 300/4

AFC for 4 units of output = 75

2.

AVC for 2 units of output = 48/2

AVC for 2 units of output = 24

3.

MC of 4th unit of output = 421-381

MC of 4th unit of output = 40

4.

Price	Output	Total Cost	MC	Total Revenue	MR	Total profit
200	0	300		0		-300
180	1	320	20	180	180	-140
160	2	348	28	320	140	-28
140	3	381	33	420	100	39
120	4	421	40	480	60	59
100	5	466	45	500	20	34

Profit maximizing quantity = 4 unit of output

After 4th unit, MC will become more than MR. So, profit maximizing output is 4 unit of output.

5.

Amount of profit = 59 ( it is at the level of 4 unit of output)